Economic Predications for 2024

While going through various market forecasts and tech trend shared by various subject and matter experts to drive 2024, I realised that most of the economic projections were off the mark. Many of them suggested China’s economic recovery, US’s recession and corporate earning slumps. But None of that happened!

2023 didn't unfold exactly as many economic forecasts predicted. It's important to remember that market projections are inherently subject to uncertainty and susceptible to unforeseen events.

Here's a quick breakdown of how some things did and didn't pan out:

Looking into China's economic recovery:

While China's recovery wasn't as strong as initially predicted due to factors like lockdowns and a property market slowdown, it didn't experience a significant collapse as some feared. Its GDP growth is still estimated to be around 4.4% for 2023, which is below pre-pandemic levels but positive nonetheless.

At the same time just look into US’s recession:

Although fears of a recession loomed large, the US economy managed to avoid it in 2023. GDP growth slowed down, coming in at around 2.4%, but remained positive. The key factors like resilient consumer spending and a strong labour market contributed to this outcome.

Looking into Corporate earnings:

While some industries and companies faced challenges, overall corporate earnings remained relatively strong in 2023. Many businesses adapted to the changing economic environment and found ways to maintain profitability.

Interest rates remained at 22 years high, impacting borrowing costs and economic activity. This was primarily driven by central banks trying to curb inflation. The Magnificent 7 i.e. Apple, Amazon, Microsoft, Alphabet, Meta, Netflix, and Tesla defied economic headwinds and achieved record profitability in 2023. This is attributed to factors like strong digital adoption, cloud computing growth, and resilient consumer demand for their products and services.

There are Resilience on consumer spending: Despite inflationary pressures and economic uncertainty, consumer spending remained surprisingly robust in 2023 and this fuelled economic growth and supported businesses, particularly in sectors like retail and e-commerce.

Secondly Subdued oil prices: Contrary to some predictions, oil prices remained lower than expected due to factors like global recession fears and increased supply from major producers. This provided some relief to consumers and businesses facing rising energy costs.

The most interesting is US regional bank meltdown: The financial difficulties and closures of several smaller US regional banks raised concerns about the health of the banking sector. This highlighted potential vulnerabilities in the financial system and the need for continued monitoring.

With all the above factors, consumer spending remained high and oil prices were subdued. We also witnessed meltdown of US regional banks that shook investor sentiments. There was a spectacular collapse of FTX and crypto currency exchange!

Overall, 2023 was a year of contrasts, with some sectors thriving while others faced challenges. It serves as a reminder of the dynamic and unpredictable nature of the global economy, where unexpected events can significantly impact markets and forecasts.

After reviewing the December meeting, the US Fed indicated that there could be cuts in 2024 bringing down lending rate. There are many uncertainties for 2024.

There is a doubt, how inflation is going to recede. If the price falls in a disorderly and abrupt manner that may imply lack of consumer confidence which may start a recession. This is to be noted that all Fed interest tightening exercises since last 50 odd years have finally ended in recession.

With this the cost of capital will continue to be in the higher side during 2024 and companies will have to continue to service debts and that may impact their earnings.

At the same time, Geo political situation continues to be fragile with conflicts in middle east causing another concern for investors coupled with ongoing Ukraine war.

Only time will spell the truth….With this let’s hope for a magnificent year 2024 ahead…..