CAMBRIDGE – Once again, US economic and market forecasters are having a difficult time. Worse, while 2023 surprised on the upside, the deviation from projections in 2024 could be much less favorable.
Recall the start of 2023. Forecasters had overwhelmingly anticipated a difficult year for economic growth, and that this would translate into even more losses for the diversified-portfolio investors who had already suffered one of the worst years on record in 2022. In a now famous October 2022 headline, Bloomberg warned: “Forecast for US Recession Within Year Hits 100% in Blow to Biden.”
The prediction of a 2023 recession proved correct, but only for Germany and the United Kingdom, not the United States. The contrast was stunning. While the first two countries experienced two quarters of negative growth in the second half of the year, the US economy grew at an annualized rate of around 4%. Meanwhile, the worrisome investment losses incurred earlier in the year yielded to handsome gains overall, owing to the dramatic turnaround in October for both stocks and bonds.
Chastened by that experience, most forecasters entered 2024 with quite a rosy outlook, anticipating that America’s growth exceptionalism would continue, as would solid investment returns. Yet the growth data for the first quarter came below the consensus forecast, and inflation has proved stickier than many expected.
Read more here.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out our videos.
