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Markets and Economy

2024 Economic and Market Outlook

By Jason Herried, Jon Henshue • January 26, 2024

2 minute read time

2024 Year Forecast

Download a copy of the full report providing out outlook on the economy, markets, and how we’re currently positioning portfolios.

2023 turned out to be a much better year for the economy and markets than expected thanks to a fourth quarter rally triggered by a one percentage-point decline in key interest rates. Let’s look back to a year ago:

  • Most economists had forecasted a recession to begin by mid-year due to high inflation and the torrid pace of interest rate hikes to fight it.
  • In turn, companies were expected to struggle with recession leading to declines in earnings and stock prices.
  • On the other hand, the outlook for bonds was encouraging considering investors could earn over 4% on their bond portfolio. However, the interest rate outlook was divided given the potential for recession fears to drive rates lower and persistent inflation to push rates higher.

In the end, though, investor caution proved unnecessary. The economy remained resilient, inflation moderated and, in November, the Fed signaled it had likely made its last rate increase for the cycle.

Now, as we look to 2024, expectations have changed considerably. Investors expect economic growth to slow from current levels but avoid a recession, and inflation is expected to continue to slow toward the Fed’s 2% target. Although the setup for markets is mixed, this year’s better economic outlook seems to hold sway with investors, given that securities prices already reflect favorable expectations.

Following is a brief summary of our outlook for stocks, bonds and alternative investments. We will publish a more detailed outlook for each asset class in the coming weeks.

Stocks: Time to rebalance. We expect continued gains should the economy avoid recession. However, we are mindful of downside risk considering elevated valuations with the S&P 500 Index trading near 20 times expected 2024 earnings.

Bonds: We expect another year of gains in 2024 considering yields are currently in the 4-5% range for investment-grade bonds and the Federal Reserve will likely be cutting rates.

Alternatives: We anticipate favorable performance in both absolute terms and relative to stocks and bonds. Potentially lower rates and continued elevated inflation should position alternatives to perform well.

This information is for educational and illustrative purposes only and should not be used or construed as financial advice, an offer to sell, a solicitation, an offer to buy or a recommendation for any security. Opinions expressed herein are as of the date of this report and do not necessarily represent the views of Johnson Financial Group and/or its affiliates. Johnson Financial Group and/or its affiliates may issue reports or have opinions that are inconsistent with this report. Johnson Financial Group and/or its affiliates do not warrant the accuracy or completeness of information contained herein. Such information is subject to change without notice and is not intended to influence your investment decisions. Johnson Financial Group and/or its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared. Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. Certain investments, like real estate, equity investments and fixed income securities, carry a certain degree of risk and may not be suitable for all investors. An investor could lose all or a substantial amount of his or her investment. Johnson Financial Group is the parent company of Johnson Bank, Johnson Wealth Inc. and Johnson Insurance Services LLC. NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE