Based on the information gathered from the news and economic data, here’s a summary of the financial market moves and sentiment towards GDP growth and inflation this quarter:
Financial Market Moves:
The financial market has shown positive signs this quarter, with many analysts predicting a continuation of the bull market trend. The Federal Reserve’s pivot towards rate cuts and the potential for broadening equity rally have been identified as key drivers for the market’s performance in 2024. However, higher valuations, inflation, and rates may mute overall stock market returns relative to the prior decade.
GDP Growth Sentiment:
The US economy has outperformed expectations following consecutive quarters of contraction in the first half of 2022. Real GDP grew at an about 2.9% annual rate in the four quarters leading up to September of this year, with the economy on track for a 2.6% growth on a fourth-quarter-over-fourth-quarter basis for the entirety of 2023. The economic outlook for Q1 2024 suggests a cooling off but not a breaking of the growth trend.
Inflation Sentiment:
Inflation has fallen back greatly, and it is expected to come back to the Fed’s 2% target by the second quarter of this year. Core PCE is projected to hit 2% year over year by this point. The consumer has powered growth so far, but it is expected that this power will wane a bit during 2024 as fiscal support has fallen away. Core inflation should tail off toward 2.5%.
Overall, the financial market has shown positive signs this quarter, with a continuation of the bull market trend driven by the Federal Reserve’s pivot towards rate cuts and the potential for broadening equity rally. However, higher valuations, inflation, and rates may mute overall stock market returns relative to the prior decade. The economic outlook suggests a cooling off but not a breaking of the growth trend, while inflation is expected to come back to the Fed’s 2% target by the second quarter of this year.
Pilot Macro Advisors 