This week we released Wealth Outlook 2024: Slow then grow, Investing in the markets’ big reset. We see 2024 as an important transition year that sets the stage for sustainable rates of growth and market returns ahead. Though growth is likely to slow in early 2024, we see no synchronized collapse across the global economy, as many fear.

This Friday’s employment report underscores the US economic resilience we discuss in our Wealth Outlook 2024. Despite the fastest rate hiking since the Fed started announcing targets, the US economy has been stronger than most expected.

While some might anguish over the 0.4% monthly gain in US wages in November, most data show the Fed is handily winning the inflation fight with its patience and persistence.

At the moment, markets price the probability of the first Fed rate cut in March at 45%, whereas prior to the employment report the likelihood was closer to 75%. This tells us people were expecting a very quick turn in US monetary policy and a faster decline in demand for labor. Not so fast. 

We have little doubt that US employment gains will continue to slow. While there were some strong segment gains in November, only 52% of private industries – barely a majority – added headcount.

When supply and demand meet at a high level as inflation is falling, there is no need to crush the economy and labor markets to bring down inflation. The Fed will likely make this observation and it is one of the key reasons why financial markets have responded positively to reports showing inflation is slowing over the past few months.

We believe that balanced portfolios have the potential for stronger performance over the next decade than has been experienced for some time. Diversification may also diversify portfolios from security concerns and unpredictable election results – two impending risks.