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Quarterly Outlook: Economic Momentum Continues

At the start of Q2 2024, the American economy remains resilient with surprisingly solid growth. Our Quarterly Outlook explores what may lie ahead for markets and the economy.

Main Takeaway

Although markets had a strong first quarter, inflation has been stickier in some key areas of the economy. The services industry continues to be resilient, with employment rising and inflationary pressures increasing, while more interest rate sensitive areas, such as manufacturing, are weaker. The optimistic tone from the Fed has improved the outlook for interest rate cuts, though less liquidity in the banking industry, plus continued fiscal deficits, may keep rates higher for longer.

Top Risks

Rising geopolitical tensions and rate cut predictions have been the main themes this presidential election year. Low office occupancy rates have renewed concerns about the banking sector’s stability, contributing to tighter lending conditions. Municipal finances are coming under pressure in large cities. Government debt levels in most developed nations and China are at all-time highs. Inflationary pressures in the services sector could keep inflation above the Fed’s 2% target for some time.

Sources of Stability

While the Fed’s battle against inflation may not be over, it has made some progress in interest rate sensitive areas of the economy. House prices have stabilized and show signs of rebounding, and businesses are still increasing wages, suggesting a strong economic undercurrent. The S&P 500 has continued its upward climb, credit spreads have tightened, and IPO and M&A activity has picked up. The likelihood of a recession has fallen, barring an unexpected event.

Beacon Hill Private Wealth is an independent, fee-only, fiduciary investment advisor providing evidence-based wealth planning solutions that simplify our clients' financial lives.  We serve clients in the state of New Jersey and across the country.

Founder Tom Geoghegan, CFP®, CIMA®, CPWA®, RMA® is also a member of the National Association of Personal Financial Advisors (NAPFA), the Financial Planning Association (FPA), and featured on the Fee-Only Network

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Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Diversification neither assures a profit nor guarantees against a loss in a declining market. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.

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