Despite recent economic turbulence, Strategas analysts maintain a cautious outlook for the U.S. economy, predicting a 30% chance of a recession in 2024.
In their latest Economic Balance Sheet Update, they highlight the impact of “higher-for-longer (H4L) interest rates,” which have notably weakened housing sales data.
Strategas evaluates 14 broad U.S. economic sectors monthly, categorizing them as Assets or Liabilities. This month, their net balance sheet calculation declined to +1, signaling growing economic concerns. However, several key supports in the U.S. economy remain robust.
Nonfarm payrolls, consumer spending, and business investment in capital and labor continue to drive consumer spending on goods and services.
The analysts note that previously weak sectors, such as manufacturing, have begun to rebound, suggesting that the Federal Reserve still has a chance at achieving a soft landing in 2024. Nevertheless, higher interest rates are expected to exert additional pressure, particularly on small businesses and short-term borrowers like credit card users.
Strategas’ outlook also includes a 60% chance of a soft landing and a 10% chance of an upside surprise this year. They anticipate the first Federal Reserve rate cut to occur in September, reflecting a cautiously optimistic yet vigilant stance on the economic landscape.