Disinflation Expected to Continue in 2024, But Risks Remain for Economy and Markets
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Disinflation is likely to continue in 2024, but at the cost of economic deterioration. The key question is whether inflation or growth will give way first.
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Markets are already pricing in an end to Fed rate hikes and the start of an economic recovery and bull market. However, volatility is still expected.
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The feared 2023 US recession now looks unlikely given low unemployment. The most probable scenario is moderate economic growth.
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The Fed will likely start cutting rates by mid-2024 if disinflation continues. This could spur significant investor flows back into risk assets.
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Geopolitics and elections may cause short-term market swings but are unlikely to alter long-term trajectories. The policy response to crises is more impactful.