Private Client Group

January 29th, 2024

Economic Indicators Point To A Recession, But Will It Arrive?

Share
Subscribe

In this week’s Steady Investor, we explore current market news that we believe investors should keep on their radar, such as:

• Rising credit card debt
• China steps up stimulus
• The current growing economy

Credit Card Debt is Rising – A Sign that Consumers Are in Trouble? Armed with stimulus money following the pandemic, Americans paid down credit card debt at a rapid clip, and the delinquency rate on credit cards fell to its lowest level in decades. 2023 was a turnaround year in credit card spending—but not in a good way. Consumers had a banner year of spending, but data shows that an increasing amount of that spending was put on credit cards. Money center banks reported that credit card spending went up significantly in 2023, with JPMorgan Chase showing a 9% increase and Wells Fargo reporting a 15% increase. A strong labor market and rising real wages are bolstering Americans’ ability to spend, but some may be stretching a bit too much. Banks also reported that it is taking Americans longer to pay off balances, with unpaid balances passing 2019 levels for the first time. The bottom line in 2023 is that U.S. consumers appeared to spend more than they made, which makes this data worth scrutinizing in the new year. We don’t think it’s time to raise alarm just yet—as seen in the chart below, delinquency rates shot up over the past year, but remain below the long-term average over the past three decades.1

What Can Investors Expect in 2024? Get Our Insights and Tips!

Will this year bring a “soft landing” for the economy or a bumpy ride? There are many factors that could influence the economy in the months ahead.

In our exclusive January 2024 Zacks Market Strategy Report, we look at other potential outcomes—including an economy in 2024 that is much stronger or weaker than most pundits expect.

Download your free report now for our insights, including:

• Betting against a soft economic landing
• Consumer spending is up, but Americans are feeling down. Why?
• How earnings estimates may evolve in 2024
• And much more!

If you have $500,000 or more to invest and want to learn more, download your guide today!

Download Our Exclusive “Market Strategy Guide”2

Delinquency rates have moved sharply higher, but are still below longer-term averages

Source: Federal Reserve Bank of St. Louis3

China Steps Up Stimulus to Ail Slowing Economy – China is best known as the ‘world’s manufacturing floor’ and a powerful export economy. But what is less well-known is how crucial the real estate sector and related industries are to the overall economy, which combined account for roughly 25% of the country’s GDP. And for the past two years, China’s property sector has been mired in a downturn that is dragging economic growth down with it. Layoffs in the sector have been high, and Chinese consumers are shifting into saving mode as their confidence for a real estate market revival dim. Sales of new homes in China fell 6% last year, falling back to 2016 levels, and existing home prices in some of the country’s most populated cities have fallen over 10%. Markets have been anticipating that the Chinese government would step in forcefully to stem the downturn, but the past year was largely disappointing in the realm of fiscal or monetary stimulus. That narrative started to change last week, with China’s central bank announcing it would cut banks’ reserve requirements in an effort to free up more cash for lending to households and businesses. Investors are eager to interpret these announcements as the beginning of a full policy pivot, but it is arguably too early to tell.4

Leading Economic Indicators Point to Recession, But Economy Keeps Growing – What was once a steadfast indicator for recessions and expansions—the Conference Board’s Leading Economic Index (LEI)—has ostensibly lost a bit of its luster. Since the beginning of 2022, the LEI has been sending strong signals that the U.S. economy was charging toward a recession. On Monday of last week, the Conference Board reported that the LEI has now fallen for 22 consecutive months. The recession never arrived. Instead, the Bureau of Economic Analysis reported today that the U.S. economy grew by 3.3% in the fourth quarter (“advance” estimate) and 3.1% in 2023, an indication that the economy accelerated when LEI has been predicting for several months that it should be contracting.5

The Conference Board continues to believe a recession is around the corner, predicting that the U.S. economy would contract in Q2 and Q3 but then recover late in the year. Time will tell.

Investing in 2024 – It’s becoming a consensus in the investing world that 2024 will bring a “soft landing” for the economy—meaning that inflation and other problems will be resolved without a recession or significant market downturn.

No one knows what’s to come in this fluctuating market; however, to ease your uncertainty, I am offering our free January 2024 Zacks Market Strategy Report. This report focuses on potential market outcomes, such as:

• Betting against a soft economic landing
• Consumer spending is up, but Americans are feeling down. Why?
• How earnings estimates may evolve in 2024
• And much more!

Download Our Exclusive Market Strategy Report6

Disclosure

1 Wall Street Journal. January 24, 2024. https://www.wsj.com/finance/banking/credit-card-debt-is-upand-its-taking-longer-to-pay-down-237cc4a3?mod=djemRTE_h

2 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion.

3 Fred Economic Data. November 20, 2024. https://fred.stlouisfed.org/series/DRCCLACBS#

4 Wall Street Journal. January 23, 2024. https://www.wsj.com/world/china/desperate-chinese-property-developers-resort-to-bizarre-marketing-tactics-1dd4d35e?mod=djemRTE_h

5 BEA. 2024. https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-advance-estimate#:~:text=Real%20gross%20domestic%20product%20(GDP,real%20GDP%20increased%204.9%20percent

6 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.
READ PREVIOUS
How Much Will The Fed Cut Rates In 2024—and Does It Matter?
READ NEXT
How Will The Red Sea Shipping Attacks Impact The Global Economy?

Explore Zack’s Archives

View
Mitch's Mailbox
February 28th, 2024
LEI Is Usually A Reliable Recession Indicator, But The Latest One Never Showed Up
Read more
Private Client Group
February 26th, 2024
Home Sales Up In January, Eurozone Recovering, Fed Rate Cut Update
Read more
Mitch on the Markets
February 26th, 2024
Inflation In January: A Closer Look At Its Impact And Implications
Read more
Mitch's Mailbox
February 22nd, 2024
January’s Economic Struggles: What Lies Beneath The Numbers?
Read more
Private Client Group
February 20th, 2024
Rate Cuts May Be Pushed Back, Shoppers Retreat, Oil Market Uncertainty
Read more
Mitch on the Markets
February 20th, 2024
As Stocks Surge, Are Investors Becoming Afraid Of Heights?
Read more

Daily financial tips directly
from the Zacks family.

Top

Search

Contact

I'm a Private Client I'm a Financial Professional