The recession that never was

Stop reading market headlines EDITOR’S NOTE: I’m sharing some market analysis from the team over at Avalon today. From time to time, I like to give you a behind-the-scenes look at what clients at money management firms come to expect from their investing teams. In December 2022, nearly everyone agreed: A recession was coming. With the Federal Reserve embarking on its fastest hiking cycle in decades, inflation cutting into spending power, excess savings drying up, geopolitical turmoil in Eastern Europe, a property crisis in China, U.S. housing affordability at its lowest level in decades, an inverted yield curve, and the stock market in the worst bear market since 2009, all the evidence seemed to point in one direction. Economists — including those on the Fed’s staff — had widely expected a recession in 2023 as the central bank raised interest rates to bring down persistently high inflation. The economic downturn never came, though. Instead, the GDP actually rose in the 4th quarter to nearly 5%. That’s the problem with making predictions about the economy. Even the best economists aren’t very good at it. The recession never came, and the stock market surged. As it turned out, the 2023 economic story will be remembered as one of a resilient U.S. consumer as people opened their wallets more than economists had projected. That occurred largely because Americans entered the year with more money than many realized, backed by trillions of dollars sent into the economy during the pandemic. And with consumers representing nearly 70% of GDP… they helped keep the U.S. economy from falling into a recession. What’s more, the Personal Saving Rate, the percentage of their income that people save, has leveled off and begun to uptick. The bad news is that the current level of 4% is less than the average of 7% seen pre-pandemic. With consumer confidence softening, and now that the holiday season has closed, it will be important to observe consumer activity as we enter 2024. One warning sign is that credit card delinquencies have been steadily rising, a sign that the consumer may be getting stretched. Looking ahead to 2024 Will growth continue to lead? It’s remarkable how market leadership has reversed course with the turning of the calendar over the past few years. Value took charge at the end of 2021, then handed the reins back to growth at the end of 2022. As of December 2023, the Growth/Value ratio is right back to where it was two years ago. Will value fall back in favor in 2024? Stocks had a great year, but the S&P 500 hasn’t broken out. At least not yet. Can we expect stocks to blow right past this level as if it doesn’t exist? Or does resistance matter? A rejection here – just when investor sentiment has shifted to bullish extremes – could set the stage for a difficult first half. For now, the offense remains on the field. Will gold ever break out? We’ve been watching $2,100 for what seems like forever. Will gold ever break out to new highs? Maybe 2024 is finally the year that gold finds itself back in the limelight. Gold’s gone roughly nowhere since the 2011 peak. The last time we saw a decade-long consolidation resolve higher, the yellow metal jumped more than 300% over 5 years. This for sure seems like one to watch… If you’d like to hear more from our team and get a behind-the-scenes look at how Avalon is investing their clients’ money, [sign up for our free newsletter ADAPT](. We’re dedicated to seeing people succeed, so we send ADAPT every week with market insights from a responsible money management perspective – not just one-off stock ideas. It’s your only way to get intel on major shifts in the stock market and asset classes right to your inbox to help you make more informed investment decisions. [Click to subscribe and join us now]( – we look forward to talking to you more soon. Until next time… DISCLAIMER: True Market Insiders sent this to you on behalf of a third party, Avalon, a registered investment advisor. Avalon and True Market Insiders are separate entities. Neither company owns the other. Both companies are owned by Chris Rowe. This article is an advertisement to sign up for a free e-letter called ADAPT, which is published by Avalon. True Market Insiders is NOT a registered investment advisor and is not licensed to give advice. True Market Insiders is a financial publishing firm that broadcasts and publishes educational investment material for educational purposes only. [YouTube]( [Facebook]( [Twitter]( [Instagram]( [LinkedIn]( DISCLAIMER ©2023 by True Market Insiders, LLC, Protected by copyright laws of the United States and international treaties. 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