Economists at Bank of America (BofA) Global Research released their 2024 outlook, calling for a soft “landing” for the economy.
“2023 defied almost everyone’s expectations: recessions that never came, rate cuts that didn’t materialize, bond markets that didn’t bounce, except in short-lived, vicious spurts, and rising equities that pained most investors who remained cautiously underweight,” Candace Browning, head of BofA Global Research, said. “We expect 2024 to be the year when central banks can successfully orchestrate a soft landing, though recognize that downside risks may outnumber the upside ones.”
Specifically, BofA is calling for continued disinflation, or a decrease in the rate of inflation, next year, with interest rates expected to begin midway through 2024 in the United States and Europe. BofA targets June 2024 as the first rate cut, 25 basis points. Then they expect 25 point cuts each quarter the rest of the way.
While the rate hikes over the past two years could lead to higher unemployment in 2024, BofA is calling for a soft landing – meaning no recession.
Analysts are also calling for the S&P 500 to end 2024 at 5000, which would be an all-time high. That would be about a 10% increase over its current level.
Regarding the markets, Chief Investment Strategist Michael Hartnett thinks the markets in 2024 will be about the 3Bs — bonds, bullion & breadth. He is also looking out for the 3 Ps — bearish investor positioning, recessionary corporate profits, and easing policy before he is ready to call for a bull market.
Among other predictions, BofA expects Brent crude to average $90, Japan inflation persisting, rate cuts and a peaking US Dollar as a positive for Emerging Markets, quality yields in credit, an elevated 10-year Treasury yield, and slowing investment spending being a drag US economic growth.
“Our US economists expect consumption to slow down but not to crash. While capex has secular tailwinds, cyclical headwinds also exist, as evidenced by fewer CEOs expecting higher capex over the next six months,” they wrote.
Finally, they caution about policy uncertainty as elections will occur in countries that make up over 60 percent of global GDP: