The Economic Outlook for Q3 2024
In this video, Buckingham's Chief Investment Officer Kevin Grogan shares his outlook for markets and the economy.
Chief Investment Officer Kevin Grogan shares our outlook for markets and the economy. Our latest Quarterly Outlook looks at how the Federal Reserve affects the economy through its dual mandate of achieving maximum employment and keeping prices stable. To achieve these goals, the Fed raises interest rates to reduce economic activity and lowers rates to stimulate the economy. With inflation easing and the labor market cooling, the market is expecting two or three rate cuts before the end of the year. While this may provide some relief to consumers and businesses looking to borrow funds, it’s unlikely that we’ll see rates drop to near zero anytime soon. For questions about how these trends may affect your financial plan, reach out to your advisor.
Click here to view the full Quarterly Outlook for Q3 2024.
Main Takeaway
Although risks remain, the economy has successfully navigated the path toward lower inflation without triggering a recession. Fiscal spending and the expectation that the Federal Reserve will cut interest rates have buoyed the American economy. Rates will likely stay higher for longer than anticipated at the start of the year, which continues to squeeze certain sectors. Inflation continues to stabilize in developed countries, and the likelihood of a global recession has declined.
Top Risks
Although fiscal policies have boosted economic growth, policymakers seem unwilling to navigate back toward a balanced budget. With interest expenses continuing to grow, the debt-to-GDP ratio in the U.S. is on an unsustainable path. Consumer spending is weakening among younger and lower-income households. Commercial real estate debt refinancing threatens to undermine regional banks, while a trend toward domestic production threatens higher inflation.
Sources of Stability
Globally, inflation has subsided and the threat of a recession over the next 12 months is on par with a “normal” economy. Other central banks, such as Canada and Europe, have started to reduce their target interest rates. The Fed has indicated its next move will likely be a rate cut, giving businesses and consumers more confidence to spend. Interest rates for businesses, measured by credit spreads, have fallen since the Fed’s change in messaging.
Published July 22nd, 2024.
Beacon Hill Private Wealth is an independent, fee-only, fiduciary investment advisor providing evidence-based wealth planning solutions that simplify our clients' financial lives. Founder Tom Geoghegan, CFP®, CIMA®, CPWA®, RMA® is also a member of the National Association of Personal Financial Advisors (NAPFA).
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