As you might know every year in December we make predictions about how the next year will play out for the economy and financial markets. Given we have passed the mid-year point we review how our 2024 financial forecasts have so far played out..
Our 2024 predictions
We list below our 8 predictions and how they have fared so far.
- For the year the U.S. GDP will be above 2% - YES
We just received the Q2 GDP data this week and after a slow start in Q1GDP has now grown 2.2% annualized.
- The U.S. budget deficit will remain larger than $1.5Tr - YES
The Government has kept spending way above its tax receipt with the budget deficit currently at $1.2Tr and well on track to be much larger than $1.5Tr.
US cumulative Government deficit. Data: Bloomberg
- Oil price will drop below $60 - NO
We were expecting Saudi Arabia to be inclined to increase its oil production and so potentially “flush the market” with oil supply, hence pushing its price lower. This has not happened and oil prices have remained above $70.
- Core CPI will stay above 2% - YES
As we had expected inflation has remained more sticky than most were anticipating. Core CPI has averaged 3.40% so far this year (well above the Fed 2% target).
- High Yield Credit will generate more than 7% - NO
The High Yield credit market has performed decently so far this year with the year to date performance being 3.2% (ie 6.4% annualized). While it is moving in the right direction, the outcome of this prediction isn’t clear yet.
- Fed will not cut interest rates by 125bps - YES
At the beginning of the year the markets were expecting Fed interest rate cuts happening as early as March this year. This hasn't panned out and it seems very unlikely the Fed will manage to cut by 125bps this year (as it was expected at the beginning of the year).
- The 2 year Treasury yield will stay in the 4-5% range - YES
Following our projection the 2 year Treasury yield has remained range bound and stayed right within our 4-5% range forecast.
2 Year Government Bond. Data: Bloomberg
- The Risk Parity Portfolio will generate above 7.5% returns - YES
The Risk Parity Portfolio is allocated 60% to equities and 40% to long term bonds. It has performed well this year having generated so far 9.35% and already well above our forecast.
Overall
So far our forecasts have performed decently well: 6 correct ones, 2 incorrect. Our thesis of stickier inflation and “after the Fed is done hiking” seems to be playing out. Let's see how the second half of the year plays out…
Ben Verschuere
Chief Investment Officer
Disclaimer: Not investment advice. The views and opinions in this piece are just the author's own, offered to the public at large and not to any one particular investor.
