As we approach April, the financial markets and economy are showing mixed results for the first quarter of 2024. March saw most markets up in the low single digits, but overall, the quarter was a bit more mixed. While U.S. and developed nation stock markets performed well, setting new price records, fixed income lagged behind as interest rates rose. This reflection of the broader economy shows a mix of growth and inflation continuing throughout the quarter.
Despite signs of a slight pullback in consumer and business confidence, there are no imminent signs of recession as the economy continues to show strength. Job growth has remained strong so far this year, along with positive income, spending, and business investment. The overall outlook for the economy remains positive, with no immediate threats of a recession based on current data.
Inflation remains a concern as rates have not seen the decline hoped for by the Federal Reserve. Both headline and core inflation levels are above target levels, signaling that the Fed has not yet achieved victory over inflation. However, market expectations on rate hikes have aligned more closely with the Fed’s projections, which should help limit future volatility in the markets.
Beyond rates, other risks such as the effects of the ongoing conflict in the Middle East on supply chains and the upcoming election are causing uncertainty in the economy. External events, such as the collapse of the Key Bridge in Baltimore, also pose potential risks to supply chains and economic stability. These unforeseen circumstances highlight the real risks that exist in the market and economy.
Looking ahead, despite these risks, the U.S. economy is in a solid position for growth, particularly in the job market. Corporate earnings have exceeded expectations and are expected to continue growing, providing a strong foundation for markets. The alignment of market expectations on inflation and rate hikes with the Fed’s projections reduces uncertainty in the markets. After a strong first quarter, the momentum from 2023 is expected to continue, and the outlook remains positive as we move further into the year.
Overall, the financial markets and economy are still in a good place as we progress through 2024. Despite mixed results in the first quarter, the economy shows signs of strength with no immediate threats of recession. While inflation remains a concern, market expectations are aligning with the Fed’s projections, reducing volatility. Despite ongoing risks such as supply chain disruptions and political uncertainties, the foundation for growth in the economy and markets remains solid, pointing towards continued momentum throughout the year.
