FireSide: Q2 2024 Research roundup—Adjusting to the old normal

Our experts dive into their outlooks for macro and markets in the second quarter.

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April 10, 2024 | 23 minute read

About this episode

The first quarter was marked by a continuation of last year’s economic optimism, albeit against the backdrop of stubborn inflation and high rates. While many investors still dream about substantial rate cuts, a return to the “old normal” could require investors to adjust.

Join Executive Director, Investment Research Andrew Korz and Chief U.S. Economist Lara Rhame as they examine CRE pressures, movements in equities, and the balance of challenges and optimism in their outlooks for macro and markets in Q2.

Transcript excerpt

Andrew Korz: Welcome to FireSide, a podcast from FS Investments. My name is Andrew Korz, Executive Director of Investment Research. On today’s episode, I’m thrilled to be joined by Lara Rhame, our Chief U.S. economist, to discuss our Q2 outlook for macro and markets. Lara, thank you for making the time.

Lara Rhame: Is it already Q2?

Andrew Korz: It is indeed Q2.

Lara Rhame: Q1 went fast.

Andrew Korz: [It’s] April 3 today. And what a Q1 It was. I think, in a lot of ways, [it was] a continuation from the positivity we saw in 2023. If you consider all of the pillars of growth in our economy that drove such a strong year last year—whether it’s the labor market, whether it’s households, government spending—even businesses are now, it seems like becoming a bit more bullish on the outlook. There’s a lot of good news out there.

Lara Rhame: It’s a long list of good news that supports, gives us momentum.

Andrew Korz: It is. And, you know, I think during the first quarter, we saw the market takes some rate cuts, sort of out of the curve. But risk assets did just fine. The S& P 500 was up 10%. Credit spreads tightened further.

So, I think the first thing I want to get into is your growth outlook for Q2. Outside of some slightly higher inflation data in Q1 (which we’ll get to later) it’s been a pretty good start, all things considered. I think we’ve gotten used to some wild swings quarter to quarter in terms of macro data. Things appear to be maybe settling into a more normal pattern now where there’s not volatility. Is that kind of what you’re saying?

Lara Rhame: Yeah, I would agree with that. I mean, my underlying view of the economy in the second quarter is “Enjoy the ride”—it’s looking pretty good and don’t overthink it.

I think that is something that I am bringing to the conversations where, you know, people really are looking at risks and what we’re watching and market pricing shows that chance of recession has receded significantly. And yet there’s still this lingering uncertainty from so many investors. But as we know, the economy wants to grow.

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Andrew Korz, CFA

Executive Director, Investment Research

Lara Rhame

Chief U.S. Economist + Managing Director