This Market Prediction Will Cost You $$

|November 28, 2023
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Is anyone else having déjà vu?

The consensus market call going into 2023 was that the U.S. would slide into recession.

Everyone from Jamie Dimon and Ray Dalio to Elon Musk expected the U.S. economy to contract.

Instead, the opposite has happened. While the U.S. economy is far from being in perfect shape, it grew at 4.9% last quarter, unemployment is still under 4% and consumer spending is proving to be surprisingly durable.

Yet the calls for a 2024 recession are starting to heat up… with the same cast of characters again calling for an economic contraction…

Business Insider

While there are signs pointing to a recession (like the steepening yield curve), there are three tailwinds that imply the economic expansion we’ve seen in 2023 may continue into 2024.

Tailwind No. 1: Falling Energy Prices

One of the most common questions I get asked is whether prices will ever come back down.

It’s a valid question. Inflation has eaten away nearly 20% of consumer buying power since 2020.

But while many price increases are here to stay, consumers are at least getting relief at the pump. Oil prices are down to a three-month low. It’s not due to demand. It’s due to supply – U.S. oil production is currently at all-time highs.

U.S. Oil production

Falling oil prices should act as a buffer for consumers. But as I’m about to show you, America’s house is in better order than you might think.

Tailwind No. 2: U.S. Household Finances

I know this will come as a surprise to many of you… but the U.S. consumer hasn’t been this strong in years.

Recent data from the Federal Reserve shows American household wealth has gone up dramatically since the pandemic.

And yes, all the data is inflation-adjusted. Median family net worth surged 35% on an inflation-adjusted basis between 2019 and 2022.

And the median American has around $8,000 in liquid cash, in addition to any other assets they may hold.

That thoroughly debunks clickbait headlines like this…


And while wages have had trouble keeping up with inflation, inflation-adjusted before-tax family income is currently at all-time highs…

Family Income Is Rising

Over two-thirds of the U.S. economy is driven by personal spending. If the engine of the economy is still in good shape, then the economy should continue to expand.

Tailwind No. 3: U.S. Fiscal Spending

If there’s one thing the members of Congress agree on, it’s that the party in power gets to spend as much as it wants.

I don’t agree… but as the kids say, “It is what it is.”

And one thing the Biden administration has done is spend with impunity. The Inflation Reduction Act, for instance, includes billions in tax credits for electric vehicles, renewable energy production, carbon capture and other large construction initiatives.

That means there are billions of dollars running through the U.S. economy right now. Just look at total construction spending in the U.S…

Total construction spending

Back in 2001 and 2008, the U.S. saw either flatlining or declining construction spending. That is not expected to be the case over the next few years, and total construction spending is up 8% this year alone.

With that much capital expected to keep flowing into construction for the next few years, the “imminent recession” argument has major holes.

The Recession That Never Was

When I hear recession talk… all I can think about is this timeless phrase: “Economists have predicted 18 of the last three recessions.”

It’s very difficult to forecast what’s going to happen in a complex global economy.

Yes, there could be some unforeseen “black swan” event lurking around the corner…

But when you consider that oil prices are falling, U.S. households are in good shape and the government is spending – as Stanley Druckenmiller recently said – like “drunken sailors,” I don’t see much reason to believe a recession is likely.

And while I’m not calling a boom, I do expect the U.S. economy to keep plodding along.

Combine the factors outlined above with a Federal Reserve that’s done hiking interest rates, growing corporate earnings and a potential AI-induced productivity boom… and you should be able to see why I remain optimistic about the markets.

In my line of work, pessimists sound smart… but optimists make money.

I intend to keep making money.