Snapshot of the economic and market update for the second quarter of 2024
Dr. David Kelly, Chief Global Strategist, previews this quarter's themes and invites you to watch the entire seminar.
Hello, this is David Kelly. I'm chief strategist here at J.P. Morgan Asset Management and I had the team that produces the guide to the markets. Welcome to the economic and market update for the second quarter of 2024.
Despite facing numerous challenges in 2023, the US economy defied widespread predictions of recession. Growth moderated to a still strong 3.2% pace in the fourth quarter while inflation continued to fall towards the Fed's 2% target, although progress has slowed in recent months.
This year, moderate job gains and easing inflation should allow the US economy to continue on a soft landing path. That being said, as cyclical tailwinds fade and the US election approaches, there's still plenty of risk to economic stability.
Meanwhile, while the Federal Reserve held rates steady at its March meeting, the Fed's updated dot plot showed only the smallest possible majority of FOMC members expecting as many as three rate cuts in 2024. And they reduced the number of expected rate cuts in 2025 from four to three, underscoring the very gradual nature of the projected policy easing.
On a more positive note, they did express their intention to begin reducing quantitative tightening fairly soon. As investors adjusted to the prospect of fewer rate cuts, long-term interest rates moved higher during the first quarter. Equities, however, appeared unfazed by all of this, setting new all-time highs with the largest stocks still leading the charge.
In the year ahead, attractive relative fundamentals outside of the largest stocks should support broader equity market performance, while fixed income should continue to play its traditional role of providing income and diversification. Outside of public assets, alternatives still offer investors opportunities to enhance portfolio performance through alpha, diversification, and income.
The guide to the markets is now in its 20th year and it's constructed to try to illustrate economic fundamentals and investment opportunities and risks. However, it's important to do this concisely. There are over 60 pages in the guide, but that's far too many for any conversation about the markets.
So what we do here is boil it down to just 11 slides. In particular, we assess the recent performance of the markets in the economy, considering trends in growth, jobs, and inflation in the United States and how these trends are shaping the outlook for monetary policy. This is followed by comments on growth from around the globe. Finally, we consider the implications of all of this for those investing across asset classes and highlight the importance of stepping out of cash and actively engaging in opportunities in alternative assets.