Market Outlook

Q1, 2024: Balancing Act

Growth, Inflation & Policy

As of January 24, 2024

Leading Economic Index

  • Despite strong economic data, the Conference Board’s Leading Economic Index (LEI) continues to signal a “short and shallow” recession in the first half of this year and a slowdown in future economic activity.
  • This creates a volatile backdrop for stocks, as historical LEIs at these levels have tended to exhibit win-big lose-big dynamics.
  • Based purely on LEIs at these levels, a wide range of outcomes presents with subsequent one year-forward equity returns ranging from +50% to -40%.

Consumer Credit

  • Over the past year, household excess savings have been rapidly depleted. According to data from the San Francisco Fed, there was approximately $800 billion in accumulated excess savings across U.S. households at the start of 2023.
    • Over the past 12 months, the San Francisco Fed estimates that this has been worked down to between $0 and $100 billion.
  • Revolving consumer credit (which includes credit cards) continues to climb and remains well above trend. While consumer spending remains resilient, it seems that consumers are needing to take on significant debt, at high costs, to be able to continue spending, particularly as excess savings are rapidly depleting.
  • The average interest rate on credit cards with assessed interest (i.e., a balance that carries over to the next billing cycle without being paid off in full) is at an all-time high of 22.75%. Some credit card companies are reporting interest rates exceeding 26% on new credit card accounts.
    • Despite market interest rates declining meaningfully over the past month, the consumer has yet to find relief from higher interest rates.
  • Credit card delinquency rates across both large domestic commercial and small domestic commercial banks are starting to tick up.
    • While delinquency rates at larger banks remain relatively contained at 3.0%, delinquency rates at small banks are at a record high of 7.5%.

For additional market insights, download our complete market outlook report.

This material is provided to advisors by Mount Yale Investment Advisors, LLC and contains market commentary from third-party sources it believes to be reliable. However, Mount Yale has not independently verified or otherwise investigated such information and makes no guarantee as to its accuracy or completeness. In the event any of the assumptions used herein prove not to be true, results may vary substantially. All investments entail risks. Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested indirectly. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. It is not intended to be a client-specific suitability or best interest analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities.

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