Growth, Inflation & Policy
As of April 26, 2024
Stronger Economic Growth
- While still negative, the Conference Board’s Leading Economic Index (LEI) is starting to recover, and the Conference Board no longer forecasts a recession in 2024.
- There are further signs of stronger economic growth.
- Final Gross Domestic Product (GDP) results confirmed that the U.S. economy remained strong throughout 2023. Fourth-quarter GDP growth was revised upwards from 3.2% to an annualized 3.4%, driven by personal consumption and government spending.
- Manufacturing sector activity grew for the first time since October 2022, with an ISM Manufacturing PMI reading of 50.3 in March (a reading above 50 signals expansion in the sector).
- The March ISM Manufacturing print broke the longest contractionary trend on record for the manufacturing sector.
- The ISM Services PMI indicated ongoing expansion with a March reading of 51.4, marking 15 consecutive months of growth in the services sector.
Returns since Fed ‘Pivot’
- On December 12, at the last FOMC meeting for 2023, Fed Chair Powell ‘pivoted’ when he acknowledged that the Fed would start cutting interest rates in 2024. The Fed’s economic projections show three rate cuts for 2024.
- Heading into 2024, markets expected the equivalent of seven rate cuts for the year. However, strong economic data and stickier-than-expected inflation have led markets to now price in the equivalent of at most two rate cuts for 2024.
- There has been a notable divergence in performance since the Fed ‘pivot’ on 12/13.
- Risky assets, especially dollar hedges, such as bitcoin (+44.0%), gold (+20.2%), and crude (+16.2%) have been the top-performers, fueled also by other contributing factors, including rising geopolitical tensions and the deteriorating U.S. fiscal situation.
- Interest rate-sensitive areas such as U.S. real estate securities (-4.3%) and regional banks (-4.7%) have lagged riskier assets as stronger economic data and sticky inflation have pushed out rate cuts (“higher for longer”).
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