Economic outlook

Q4 2023 Economic outlook: Dodged or delayed?

Looking into 2024, we examine whether an economic slowdown has been dodged—or merely delayed.

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October 9, 2023 | 15 minute read

The economy is roaring into Q4 as growth continues to surprise to the upside. Beneath the optimism, growth comes at a cost—inflation, policy uncertainty and shadow tightening are all challenges markets will have to navigate in the coming quarter. Looking into 2024, investors will increasingly ask if an economic slowdown has been dodged, or merely delayed.


Q4 2023 Economic outlook: Dodged or delayed?

Key takeaways

  • The rapid rotation in expected economic scenarios has caused a significant mismatch between equity and bond markets, which is now undergoing a painful correction.
  • Inflation could reemerge (enough) to keep Fed policy unexpectedly hawkish.
  • Economic tailwinds have proven powerful but are losing gusto. We expect slower growth ahead.

The U.S. economy continued to defy gravity in the third quarter, and high frequency data point to real GDP growth of at least 3%, far hotter than the Fed’s estimate of our long-run potential. The powerhouse remains consumer spending, with personal consumption jumping 0.8% in July and retail sales for both July and August far surpassing expectations. The labor market is fuel for this engine, and while the labor market is renormalizing after COVID disruptions, by virtually every metric, it remains strong. This economic resilience has caused consensus expectations to reel from concerns about recession to hope of a soft landing to optimism that growth will continue at the current breakneck pace.

But this rapid rotation in economic expectations caused a significant scenario mismatch in markets.

Read the complete Q4 2023 Economic outlook to learn more.

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Andrew Korz, CFA

Executive Director, Investment Research

Lara Rhame

Chief U.S. Economist + Managing Director

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