2025 Economic Forecast: Consumer Spending to Propel Moderate Growth with Soft Landing – Analyst Price Insights

Highlights for 2024 Economic Outlook

• Economists anticipate a potential "soft landing" or a "Goldilocks" economy in 2024.
• Consumer spending remains a critical factor sustaining economic momentum.
• Stock markets may experience a spring dip before rebounding later in the year.
• Bond markets are poised for growth amid expected interest rate reductions.

After a year marked by elevated interest rates that failed to derail economic momentum, 2024 raises the question: will the economy achieve a "soft landing"?

The central debate among economists revolves around whether inflation can continue to decline without triggering a recession. While some anticipate a slowdown materializing in 2024, others forecast steady economic expansion.

Soft Landing or Economic Shift?

Predictions vary widely. Bank of America Securities projects a positive GDP growth of 1.4% for 2024, supported by resilient corporate and consumer fundamentals amid higher rates.

Wells Fargo expects a brief early-year slowdown followed by recovery, culminating in 0.7% GDP growth. In contrast, Commonwealth Financial Network envisions a robust 3.75% GDP expansion, describing a "Goldilocks" scenario of balanced employment and inflation.

Conversely, Vanguard forecasts a modest 0.5% GDP increase with possible negative growth periods in the latter half of the year.

Consumer Spending: The Economic Engine

Consumer expenditure, accounting for two-thirds of GDP, is anticipated to sustain growth, albeit at a slower pace, according to Bank of America economist Michael Gapen. Business and manufacturing sectors, however, may face deceleration.

LPL Financial offers a cautionary view, suggesting rising debt and depleted savings could curtail consumer spending momentum established in 2023.

Interest Rates and Market Implications

Vanguard highlights the stabilization benefits of higher interest rates, terming the return to sound monetary policy as a positive market development. Forecasts from Wells Fargo, Commonwealth, and Comerica predict gradual Federal Reserve rate cuts totaling approximately 75 basis points, lowering rates to between 4.75% and 5%. Vanguard anticipates steeper reductions toward 3.5%-4% amid slower growth.

Bonds Set for a Strong Decade

Rising interest rates have revitalized bond markets, with Vanguard increasing its 10-year annualized return forecast for U.S. bonds to 4.8%-5.8%, a significant rise from previous 1.5%-2.5% estimates. LPL Financial expects Treasury yields to remain elevated short-term before declining post-rate cuts, offering attractive bond values.

Stock Market Volatility with Recovery Potential

Market analysts predict volatility with a springtime dip in the S&P 500, followed by a rebound. Year-end S&P 500 targets include 4,875 (LPL Financial), 4,750 (Commonwealth and Comerica), and 4,700 (Wells Fargo). Wells Fargo strategist Gary Schlossberg notes expected economic headwinds but anticipates market recovery aligned with economic improvements.

Explore useful articles in Economic News as of 07-01-2024. The article titled " 2025 Economic Forecast: Consumer Spending to Propel Moderate Growth with Soft Landing – Analyst Price Insights " offers in-depth analysis and practical advice in the Economic News field. Each article is carefully crafted by experts to provide maximum value to readers.

The " 2025 Economic Forecast: Consumer Spending to Propel Moderate Growth with Soft Landing – Analyst Price Insights " article expands your knowledge in Economic News, keeps you informed about the latest developments, and helps you make well-informed decisions. Each article is based on unique content, ensuring originality and quality.