9 Economic Trends to Watch

9 economic trends to watch- everyone thought last year would be recession and it was not. This year people are looking for soft landing in light of resilient consumer and resilient corporate earnings. What do we need to watch this year?

1. Labor market - How cool will it get?
2. Inflation - Is the worst behind us?
3. Monetary policy - how tight for how long?
4. Sentiment - picking up recently in December after lagging market moves.
5. Economic Growth - slowdown, recession or something else. Tailwinds are fading and easing demand has cooled inflation. For now, it looks like a bullish Goldilocks soft landing scenario with inflation cooling without the economy sinking into recession. Simply put, the economy is normalizing. Which could increase the unemployment rate at unusually low levels. Growth could plateau and turn negative in coming months.
6. Corporate profit margins - Will they hold up? Record high corporate profit margins for 2021-2022-2023. Improved operating efficiencies- Will AI help improve productivity this quickly?
7. Interest expense - Will it become a problem? Interest expenses have not budged amid elevated rates except for the government. There is commercial real estate debt coming due, but debt service burden is light. Whoever needs to refinance at these levels will have problems.
8. Corporate earnings - better or worse expected? Some expect $240-$245; others $230-$235. Earnings drive stock prices.
9. Stock market - will it do what it normally does? It is incredibly difficult to predict precisely what the stock market will do in any given year. Since 1950 we have been in bull markets 83% of the time. So markets usually go up.

All this said, there are no sure things in life and the stock market. It pays to be cautious and know what you own. Just because something usually happens, does not mean it always happens.

Right now, the median return for stocks for 2024 is 5000 implying a 5% return from current levels. Yet there are oversold sectors and stocks with more buoyant possibilities. Yes, it will be a “stock pickers’ market” with much attention on small caps and value stocks which have underperformed over the past year.