Hello everyone and welcome to 2024. I’d like to talk about my market outlook. Please understand, outlooks are not precise. Ten different analysts may give you 10 different outlooks. Nonetheless, here is mine. Context (This is the Main Story) Based on current demographic trends (see chart below), the US is at the beginning of a rather large household formation cycle, and we know from similar trends in the past, that this cycle can have a big impact on the economy. I’m talking about the millennials . Millennials range in age from about 27-42, and the largest cluster of them is 32-34 years old right now. Think of them as the baby boomer’s children. Currently this group has the highest number of people in the country, and they will soon be the primary consumers. Because of covid and inflation, and now high interest rates, many millennials are behind in owning their own home. Regardless, time keeps moving and most will follow a traditional household spending pattern based on their age. That pattern is this: household spending tends to increase every year from age 30 to age 48. This trend may start a little later than normal for a number of reasons, but still, the time for this to happen is now! It’s already happening in my opinion, and we can clearly see it in the demand for housing. Bottom line: lots of people are about to need more and more things each year as they form their own households. This is a significant economic event and it’s just getting started! Investment Outlook Interest Rates – CD Rates have probably peaked for the time being. They spiked up in 2023 to about 5.5%, but that seems to of run its course, and now rates are drifting lower. Do I expect CD rates to go as low as before? No, I do not. The economy is too strong. I expect them to come down near the 4% range and then stabilize some. The same goes for long-term bonds and mortgage rates. I expect rates to come down some before leveling off. Real Estate – MiIlennials need homes, and as mortgage rates ease some, millennials will be there to bid on existing homes and even build new ones. Home prices had to come down some due to higher rates, and that’s fine, but significant demand for housing remains. Stocks – As so many millennials enter this stage of life together, they will need many similar goods and services. Economic activity will rise as production kicks into gear. Things like healthcare, technology, consumer goods and building supplies should all be in demand. There may even be shortages at times. Well managed companies and their stock prices should do well as they try to take care of their customer’s needs. In my humble opinion, the outlook for stocks as a group is excellent, not just in 2024, but quite possibly for the next several years. The broad stock indexes may even have higher than average returns during this time period. On a side note, I feel it would be a wonderful time to start a business. So yes, I remain very optimistic that great opportunity exists for investors that have the time horizon and the willingness to position some of their investments for growth. Keep in mind, this is not a recommendation. This is simply analyst Mike’s current outlook. We are here to help you, and I would be happy to show you in more detail why I feel the way I do. Call, email, or stop by for a visit. I would like that. Happy New Year Everyone!! Mike |
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