About this episode:
Lara Rhame sits down with Executive Director, Investment Research Andrew Korz to review last year’s 10 for ’23—and unveil this year’s 10 for ’24, her forecast for the 10 essential trends facing investors in markets, policy and the economy in the new year.
Her outlook? While 2024 is opening with optimism that a recession has been avoided, inflation, tighter credit conditions and a steep hill of debt refinancing will challenge markets.
Transcript excerpt:
Andrew Korz:
Welcome to FireSide, a podcast by FS Investments. I’m Andrew Korz, a part of the research team here at FS Investments, and I’m here today with Lara Rhame, our Chief U.S. Economist, for the last episode of 2023.
Today we’ll be discussing what is my favorite of all the pieces you put out, Lara, the 10 for ’24—where you provide us your ten big ideas for next year. We’ll also take a look back and grade our 10 for ’23.
Lara, thank you for being with me and happy holidays.
So, let’s set the stage real quick here: 2023 was a bit of a forecaster’s nightmare. Consensus economic view coming into the year was for a mild recession. Instead, we got GDP growth that will likely be in excess of 3% for the year. The leading indicators that have reliably signaled where the economy is going in the past (such as the inverted yield curve and pessimistic consumer confidence) have been dead wrong this cycle. Interest rates have been incredibly volatile, reacting harshly to shifting market expectations for Fed policy.
And looking forward to next year, the economic foundation appears solid, but there are plenty of risks: From inflation to the lagged impact of higher rates, to geopolitics and a presidential election. The equity market, which enjoyed an incredible year on the back of the Magnificent Seven, now carries a P/E ratio near 20 times, heading into 2024.
Lara, 2023 was certainly not a boring year, and given the cross currents I just laid out, I doubt 2024 will be either. So, let’s start with a brief look back at your 2023 calls, and let me just say I think it’s admirable that you put out a report card at the end of every year.
Lara Rhame:
Thank you. Instead of just like burying it and pretending like it never happened.
Andrew Korz:
It would be easy to do that, but you stand your ground.
Lara Rhame:
I try to be honest, both good and bad. Accountability is important. And hey, I’ll take my hard knocks first and point out where I was the most wrong because I was one of the many economists who were looking ahead to this year thinking we might have a mild recession.
And the reason for that is not too difficult to understand: We had the Fed raising rates—the most aggressive rate hike cycle since the 1980s.
