Ahead of Thanksgiving, the U.S. economy has a lot to be grateful for, with Wall Street and Main Street alike buoyed by a robust stock market, stronger-than-expected growth, and a low unemployment rate. With a shortened week due to the holiday, the economic outlook for 2024 is shaping up far better than anticipated at the start of the year, making the U.S. economy a global standout.
On Wednesday, the government is expected to report that the U.S. economy grew at an annual rate of 2.8% in the third quarter, exceeding expectations. The forecast for the fourth quarter remains strong at 2.6%. These figures come at a time when many economists were concerned about the potential for a slowdown. Instead, the economy continues to display resilience, spurred by robust consumer spending, business investment, and strong job growth.
Election Fallout: Potential for Further Growth
There is growing optimism that the second term of former President Donald Trump could provide a further boost to the economy. Policies such as deregulation, tax cuts, and other pro-business measures could spur even more economic growth, according to some analysts. However, these policies might also come with some costs, particularly higher inflation rates. While inflation has slowed in recent months, it remains a concern, particularly in areas like housing and insurance.
The Federal Reserve’s recent actions also indicate that inflation is a primary concern. The Fed cut interest rates by a quarter point earlier this month and by a surprise 50 basis points in September. But there is ongoing debate as to whether further rate cuts are likely, especially considering the strength of the economy and persistent inflation. Economists, such as Bill Adams and Waran Bhahirethan from Comerica, have suggested that while the Fed had initially projected more aggressive rate cuts, the resilient economy and stubborn inflation could mean a more cautious approach going forward.
Housing and Home Sales
Economic indicators, such as housing data, will also provide key insights into how the economy is faring. The S&P CoreLogic home price index for September and new home sales for October, both scheduled for release on Tuesday, will give a sense of whether the housing market remains strong. Despite rising mortgage rates, home prices are expected to continue climbing, although sales may experience a small slowdown. This could be a result of higher borrowing costs, which have already started to affect buyer sentiment.
Inflation and the Labour Market
One of the key data points to watch this week will be the October inflation report, expected to show a slight increase in the annual inflation rate to 2.3% from 2.1% in September. The Fed has made significant progress in curbing inflation, with many goods seeing price reductions or stabilising. However, services such as housing and insurance remain more expensive, contributing to a “sticky” inflation environment. The labour market will also be a central focus, with employment numbers continuing to show strength.
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Trump’s Treasury Secretary Pick: Wall Street’s Reaction
The markets are also reacting to the announcement that Trump has chosen hedge fund manager Scott Bessent as the incoming Treasury Secretary. Bessent, known for his work with Key Square Group, is widely respected on Wall Street. Analysts see him as a steady hand who understands financial markets and is likely to take a pragmatic approach to tariff implementation. Bessent is also expected to focus on reigning in the federal budget deficit through a combination of growth, efficiency measures, and cuts to discretionary spending.
Richard de Chazal, a macro analyst at William Blair, noted that Bessent’s appointment signals that Trump’s policies may not be as confrontational as some had feared, and suggests that the new administration could adopt a more business-as-usual approach. While Elon Musk had initially favoured Howard Lutnick for the role, Bessent’s selection represents a move towards traditional economic management, with Musk describing the appointment as a “business-as-usual choice.”
The Path Ahead
Despite the economic challenges posed by inflation and political uncertainty, the U.S. economy is currently in a strong position. With continued growth expected in key areas such as housing and consumer spending, and the Federal Reserve’s careful balancing act on interest rates, the outlook for 2024 remains positive. As Wall Street and Main Street look ahead to the rest of the year, there’s plenty to be thankful for — even if there are uncertainties on the horizon.
As the Thanksgiving holiday approaches, the U.S. can celebrate a year that has exceeded expectations, with hopes that the momentum will continue into 2024 and beyond.
