Nov 27, 2023 - Economy

Wall Street analysts predict 2024 vibes, from inflation to stocks

A crystal ball alternating between downward and upward trends

Illustration: Lazaro Gamio/Axios

It's that time of year on Wall Street when economists and analysts do their best to try to game out what lies in store next year.

Why it matters: The ritual publications of Wall Street forecasts provide a snapshot of widely held views on what to expect. These predictions don't necessarily turn out to be accurate — so they might better be described as a barometer of the current vibes.

The big picture: Analysts think the economy and inflation will slow in 2024, with the Fed moving to cut rates by the end of the year.

  • Yes, but: There's less clarity about what that means for stocks.

Here's a quick rundown of what economists and analysts are expecting...

Inflation: It'll keep falling.

  • Morgan Stanley: "A disinflationary cycle has been under way, mainly driven by core goods deflation and disinflation in housing."
  • Goldman Sachs: "At this point the hard part of the inflation fight looks over."
  • JPMorgan: "We think that core PCE inflation should moderate from a 3.4% annualized pace in 2023 to 2.5% in [the first half of 2024]."

The U.S. economy: A slowdown is coming.

  • UBS: "While we expect a slowdown, we do not expect a significant contraction in activity."
  • Oxford Economics: "We expect a material slowdown in the US economy in the next couple of quarters to give way to a modest acceleration in GDP growth in the second half of 2024. In effect, the Fed will pull off a 'soft-ish' landing."
  • TD Securities: "Our 2024 Outlook revolves around our view of slowing US and global growth culminating in a mid-2024 US recession."

The Fed: Rate hikes are finished. The debate is about whether there will be cuts in 2024.

  • Morgan Stanley: "The Fed holds policy at a 5.375% peak of this cycle until June 2024, when we expect a cutting cycle to normalize rates to begin."
  • Goldman Sachs: "We expect the FOMC to deliver its first rate cut in 2024 Q4 once core PCE inflation falls below 2.5%."
  • Moody's: "We envision [the Fed's] first rate cut around the end of Q2 next year and a cumulative decline of at least 100 [basis points] to 4.25%-4.50% by December 2024."

The stock market: Most prognosticators expect a flat to middling year, though some see more upside (BofA), or potential for a sharp sell-off (SocGen).

  • Goldman Sachs: "In a world where the risk-free rate is about 5%, it remains difficult to get excited about risk-adjusted returns in equities."
  • Société Générale: "2024 should be a decisive year for the S&P 500, which should find its 'true' bottom for this cycle."
  • BofA Securities: "We're bullish not because we expect the Fed to cut, but because of what the Fed has accomplished."

The bottom line: Nobody, not even Wall Street's best analysts and economists, can tell the future. So take all these forecasts with a hefty handful of salt.

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