It’s that time of the year when top-rated strategists expose their predictions for the year to come. 12 months ago, they were convinced that the US was heading into a downturn, resulting in an outright fall for stocks. They were wrong. They did not foresee that Americans would spend a big chunk of the personal savings that they had accumulated during the pandemic nor did they believe that the US economy was in a mini-productivity boom. Currently, most soothsayers are neutral about 2024, thinking the economy and inflation will slow down toward a mild recession – the so-called soft landing – thereby forcing the Fed to cut interest rates by the end of 2024, but with little clarity on what the stock market will be up to. Their case relies on the view that the bulk of the excess savings has already been depleted, the fiscal largesse of the Biden administration is exhausted and higher interest rates will bite. Interest rate futures, however, indicated last week a roughly 65% chance the Fed will adjust rates lower by its May 2024 policy meeting.
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By Hubert Marleau
