As 2023 comes to a close, we can take a look at how the markets and economy performed, where we stand now, and what might be on the horizon for 2024.
So first, here are some of the top takeaways and biggest headlines from this year:
2023 Markets and Economy: Inflation, Debt and the Labor Market
In 2023, the inflation rate continued to cool in response to high interest rates. Right now, we’re sitting at a 3.24 percent rate of inflation, compared to 7.11 percent one year ago. One concern about raising interest to tamp down inflation is that it can lead to a recession. Spending typically slows in response to higher rates, and layoffs can increase as businesses try to cut expenses.
But that’s not what happened this year. In fact, during the first three quarters of the year, the economy grew at a rate of 3.2 percent, and the unemployment rate remained fairly steady throughout the year. Currently, it’s at 3.7 percent, compared to 3.4 in January of 2023.
While spending and employment were stable, debt continued to increase. The average consumer credit card balance jumped 15 percent from one year ago, and just hit a 10-year high of $6,088.
The markets also outperformed expectations. The S&P 500 rose about 23 percent, and the Nasdaq Composite increased 41 percent. The markets have been buoyed by a surprisingly resilient economy, tech advancements and the possibility of rate cuts in 2024.
(Note: Bonds were the exception here. While the market was going up, bonds were fluctuating. So if you felt like your bonds didn’t perform well, that’s to be expected. And that is also why we build balance into a portfolio. When something is up, inevitably, something else will be down.)
All in all, the markets and economy performed stronger than anticipated in 2023.
2024 Markets and Economy Outlook
Now that inflation has come down significantly, many economists believe we’re going to achieve a “soft landing” – meaning we can return to an average rate of inflation without causing a recession.
Experts have been eyeing the possibility of a recession for a few years now, but it’s starting to look like we might be able to avoid one entirely for the time being.
In 2024, economists are expecting an increase in GDP (gross domestic product,) a steady labor force, a typical rate of inflation, strong markets, and even a cooldown in interest rates. In other words, there are lots of reasons to be optimistic about the year ahead.
That being said, there is no way to know for sure what the year ahead holds. (Looking at you, 2020.) As you make your plans for the year ahead, continue to focus on long-term plans and building a portfolio and a financial plan that is balanced and resilient.
Here are some of my posts about building a strong portfolio:
Refreshing Your Portfolio for the Best Growth
Take the Guesswork Out of Your 401(k) Investments
Creating Your Personal Investment Pillars
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At Your Richest Life, physician-focused financial planner Katie Brewer, CFP®, wants to help you build a successful financial future. For more information on the services offered, contact Katie today.
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