We kicked off 2024 with a bang. Well, not exactly the fireworks type of bang, but more like a thud. The first few trading days of January brought back our old friend, Mr. Volatility. It seems we may have missed him a bit. Not really, but everyone wants to feel needed from time to time! No real surprises, to be honest, and this was expected by many given the run higher into year-end. Today kicked off a fresh round of economic data, with the December jobs report showing an increase in nonfarm payrolls of 216,000. Forecasters were expecting an increase of 170,000, so much better than anticipated. The unemployment rate held steady at 3.7% versus expectations of 3.8%. For now, this will only add more angst to an already shaky start to the year. The increased speculation as to the timing of rate cuts by the Federal Reserve later this year will likely grow from here based on the numbers released today.
An interesting point to consider regarding any rate cut timing, however, is not necessarily when rates cuts might begin but more importantly, why. It might not just be as simple as “rate cuts are upon us because we have won the battle against inflation.” It could be more indicative of a thought process along the lines of “rates cuts are upon us because economic weakness is forcing our hand.” No one is hoping for the latter to be the case, but this is certainly something that is sure to be on the minds of the Federal Reserve’s monetary policy members. Just when the Fed might have started to breathe a sigh of relief, the proverbial devil on the shoulder seems to be lingering around! In any event, the monumental task of keeping the train on track has, and will, remain a heavy burden.
My own personal early forecast for the year is still a bit mixed. On one hand, the end of the rate hike cycle is more than welcome. On the other hand, it remains to be seen if the economy can continue to grow at the pace we saw in 2023. The stars are not quite aligned to completely rule out a mild recession, especially given the stubbornness of the labor market. We know for a fact that companies are again rethinking their strategy when it comes to costs in general, demand-driven decision making, and the work from home mantra. Changes are afoot on many fronts for each of these hot topics. Technology and AI will drive much of the decision making again in 2024 while consumers digest the still elevated pricing of goods and services. While we may be turning a corner and starting to write a new chapter, there is still much to be sorted through. Oh, I almost forgot, this is also a Presidential election year. We can’t forget about that! Modest growth for 2024 would be welcome and achievable in my view. A more rounded and robust performance from many other sectors of the market, not just technology, will be needed to achieve this. It is certainly possible given the current backdrop. Fourth quarter earnings are coming soon, and the forward-looking commentary will be important as usual. For now, we will have to sit back and stay tuned.
Have a nice weekend.
Christopher E. Wasson, CFP®
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
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