470 W. 78th St Suite 200, Chanhassen, MN 55317
Call Me Today: (952) 470-0750

Insights and Trends: Explore Our Midyear Market Update

10 Jun
Insights and Trends: Explore Our Midyear Market Update

By: Colleen Weber

Economic Outlook / News and Updates

Comments: No Comments.

By Colleen Weber, CFP®, CPA

We’ve reached the midpoint of 2024—how’s your financial journey unfolding? It’s the perfect opportunity to take a breather and assess the economic trends shaping both our market and your financial portfolio. Despite the hurdles of 2023, we’ve witnessed encouraging developments in key sectors throughout the first half of this year.

In this article, we share an in-depth midyear market update, where we dissect the latest happenings to help you navigate the upcoming months and strategize your next financial moves.

Markets Are Up

So far in 2024, financial markets have shown steady, positive performance. While the Dow Jones took a dip in May, the S&P 500 extended its bull market gains into the end of the month. 

Around the same time, the Federal Reserve unanimously chose to keep policy rates unchanged for the sixth meeting in a row, and rates have remained steady since the beginning of 2024. That being said, strong inflation numbers from the first quarter suggest that hitting the 2% inflation target might take longer than anticipated. What’s more, the U.S. GDP has shown positive but slower-than-expected growth coming out of the first quarter. 

This combination of stable interest rates, persistent inflation, and soft GDP growth suggests that the market may see some cautious optimism but also volatility as investors figure out their next moves. How these factors will shape the stock market for the remainder of 2024 is still largely uncertain.

Employment Remains Strong

As of May 2024, the U.S. employment scene shows steady progress with an unemployment rate of 3.9%, which translates to about 6.5 million job seekers. In fact, many leading economists have noted that the labor market remains strong and stable, offering inflation-adjusted pay raises to the average worker. Additionally, real hourly earnings, which are wages adjusted for inflation, grew by 0.5% in April 2024 compared to the previous year.

GDP Is Soft

Despite facing numerous challenges, U.S. consumer spending remained strong throughout 2023. However, this momentum has started to fade. In the first quarter of 2024, the economy posted an annualized GDP growth of 1.3%, which was slightly below the forecasted 1.6%. Additionally, consumer spending grew by 2%, falling short of the anticipated 2.5%.

For 2024, real GDP (GDP adjusted to remove the effects of inflation) is projected to slow to 1.5% in 2024. Looking ahead, real GDP growth is expected to average 2.0% annually from 2024 to 2027—slightly below last year’s prediction of 2.5%.

The Federal Reserve, Interest Rates, and Inflation 

The Federal Reserve has raised its key interest rate to the highest level in 16 years to combat high inflation. After a streak of 11 rate hikes between 2022 and July 2023, the Federal Reserve has continued to hit pause for 2024 while reassessing the current economic growth and inflation. Inflation still remains above the Fed’s 2% target, though it remains lower than its peak of 9.1% in 2022. It’s yet to be seen whether interest rates, or inflation, will bounce back higher and hamper the economy for the remainder of 2024. 

Global Economies Face Similar Issues

Global growth is projected to continue growing at 3.2% for the remainder of this year and into 2025, the same pace as 2023. The global growth forecast for the five years from now is the lowest we’ve seen in decades, largely due to the tight policies needed to manage inflation, price instability, and continued geopolitical tensions. Inflation is expected to decline to 5.9% in 2024 and 4.5% in 2025. Despite the cautious outlook, the MSCI All Country World Index is up over 7% so far this year.

Stay Ahead of the Curve

Now that we’ve discussed the recent trends, let’s talk strategy! Understanding the economic outlook is just the start—navigating the rest of 2024 calls for a proactive game plan.

Think about your future: Are you putting away enough for retirement? How much can you sustainably withdraw from your accounts each year? Are your investments aligned with your financial objectives and risk appetite? While we can’t dictate the movements of the Federal Reserve, the decisions of Congress, or the rate of inflation, we can take measures to protect our financial well-being. The key is developing a comprehensive financial strategy to navigate any challenges that come our way.

At Colleen Weber CPA, CFP® my team and I work to tailor personalized financial plans to steer you toward success. My dynamic approach is designed to help you thrive in any market condition. Reach out today and book a free introductory meeting online or call (952) 470-0750 to discuss how I can guide you toward your financial goals and aspirations.

About Colleen

Colleen Weber is a fee-only financial advisor, CERTIFIED FINANCIAL PLANNER™ professional, and CPA based in Chanhassen, Minnesota. With more than 20 years of financial planning experience, Colleen provides comprehensive financial planning and wealth management. She specializes in serving clients nearing retirement, retirees, busy professionals, and women. She is passionate about developing financial plans that save clients on taxes and investment strategies that help them pursue their goals. Learn more about Colleen by connecting with her on LinkedIn or booking a complimentary phone call meeting.