What Recession???

What Recession???

March 11, 2024

Last year as we entered 2023, most economists believed that the US economy was likely to enter into a recession at some point during the year. They had many reasons to believe this. In addition to the Fed rapidly raising interest rates -- inflation was high, the yield curve was inverted (historically a strong sign of impending recession), the stock market was underperforming, and there were several other economic indicators that seemed to point to a coming slowdown in the economy. Despite all of these things, the US economy proved to be quite resilient. Not only did the economy continue to expand in 2023, the stock market provided strong returns for the year as well. As we sit here in early 2024, most economists now seem to believe that we will avoid a recession this year as well.

So, will there be a recession and if so, when? The quick answers to these questions are “Yes” and “TBD”. Economic cycles, including recessions are a normal and reliable part of a healthy, functioning economy. We can confidently believe that recessions and expansions will come and go but accurately predicting the timing of them is the difficult part. Even today as most economists think the economy will continue to grow, things are quite cloudy and uncertain. Corporate earnings were stronger in 2023 than initially expected and continue to look promising for 2024. Inflation has cooled considerably from it’s high but still remains a bit above the Fed’s target. The stock market performed well in 2023 and has started strong in 2024, but the yield curve remains inverted (again, historically has been a reliable signal that a recession is coming). Consumer spending/confidence has slowed but the economy continues to grow. Taking these factors as well as others into account seem to indicate that 2024 will be another year of growth, but perhaps lower and slower than previous years.

So, will there be a recession? Of course, recessions always occur as a normal part of a functioning economy. When will it finally arrive? That is very difficult, almost impossible to predict. The next post will share a few thoughts that I have about recessions and why some people might worry about them a little too much.

This material is provided as a courtesy and for educational purposes only.