By Dejan Ilijevski
We are at the midpoint of 2024—how are your finances doing? Now is an ideal moment to take a break and examine the economic trends that are influencing our market and your financial portfolio. Despite the hurdles of 2023, we have observed encouraging developments in critical sectors during the initial half of this year.
Let’s explore the details of our midyear market update to assist you in preparing for the upcoming months and strategizing your next financial moves.
Markets Are Up
So far in 2024, financial markets have shown steady, positive performance. While the Dow Jones took a dip in May, the S&P 500 extended its bull market gains into the end of the month.
Around the same time, the Federal Reserve unanimously chose to keep policy rates unchanged for the sixth meeting in a row, and rates have remained steady since the beginning of 2024. That being said, strong inflation numbers from the first quarter suggest that hitting the 2% inflation target might take longer than anticipated. What’s more, the U.S. GDP has shown positive but slower-than-expected growth coming out of the first quarter.
This combination of stable interest rates, persistent inflation, and soft GDP growth suggests that the market may see some cautious optimism but also volatility as investors figure out their next moves. How these factors will shape the stock market for the remainder of 2024 is still largely uncertain.
Employment Remains Strong
As of mid-2024, the U.S. employment scene shows steady progress with an unemployment rate of 4.1%, which translates to about 6.8 million job seekers. In fact, many leading economists have noted that the labor market remains strong and stable, offering inflation-adjusted pay raises to the average worker. Additionally, real average hourly earnings, which are wages adjusted for inflation, grew by 0.8% from June 2023 to June 2024. Keep in mind, these numbers can shift as new data is reported.
GDP Is Soft
Despite facing numerous challenges, U.S. consumer spending remained strong throughout 2023. However, this momentum has started to fade. In the first quarter of 2024, the economy posted an annualized GDP growth of 1.3%, a slight decrease from the previously estimated 1.6%. This rate of growth indicates the slowest economic expansion since the downturns experienced in early 2022.
For 2024, real GDP (GDP adjusted to remove the effects of inflation) is projected to slow to 1.5% in 2024. Looking ahead, real GDP growth is expected to average 2.0% annually from 2024 to 2027—slightly below last year’s prediction of 2.5%.
The Federal Reserve, Interest Rates, and Inflation
The Federal Reserve has raised its key interest rate to the highest level in 16 years to combat high inflation. After a streak of 11 rate hikes between 2022 and July 2023, the Federal Reserve has continued to hit pause for 2024 while reassessing the current economic growth and inflation. Inflation still remains above the Fed’s 2% target, though it remains lower than its peak of 9.1% in 2022. It’s yet to be seen whether interest rates, or inflation, will bounce back higher and hamper the economy for the remainder of 2024.
Global Economies Face Similar Issues
Global growth is projected to continue growing at 3.2% for the remainder of this year and into 2025, the same pace as 2023. The global growth forecast for the five years from now is the lowest we’ve seen in decades, largely due to the tight policies needed to manage inflation, price instability, and continued geopolitical tensions. Inflation is expected to decline to 5.9% in 2024 and 4.5% in 2025. Despite the cautious outlook, the MSCI All Country World Index (ACWI) is up nearly 12% as of the end of June.
Stay Ahead of the Curve in 2024
It is essential to have an investment plan that’s right for you and that you can stick with in any economic situation.
Consider your future: Are you saving enough for retirement? What is the safe withdrawal amount from your accounts annually? Are your investments in line with your financial objectives and risk tolerance? While we cannot predict the actions of the Federal Reserve, Congress, or the trajectory of inflation in the short run, we can take evidence-based measures to safeguard our financial futures. The key lies in developing a robust and flexible financial plan that gives you the confidence to remain disciplined.
At SCM Investment Services, we assist clients in crafting a tailored financial plan designed to steer them toward success. Our evidence-based approach aligns your investments with proven strategies that can help improve your investment success over the long run. Are you ready to make the most of your financial journey? To schedule a complimentary introductory meeting or request a free financial health checkup, call (612) 324-0629 or email dejan@scminvesting.com.
About Dejan
Dejan Ilijevski is Financial Advisor, Investment Manager, and Founder of SCM Investment Services, an independent, fiduciary, fee-only financial advisory and investment management firm based in Lake Elmo, Minnesota. With an evidence-based approach to investing grounded in economic theory and reliant on insights from financial science, he customizes globally diversified portfolios of mutual funds and ETFs for his clients. With 20 years of experience in the trading/financial services industry, and described as trustworthy and community-oriented, Dejan is passionate about helping individuals and families, prioritizing their best interest first and foremost.
Originally Dejan pursued a career in research and technology but was recruited by a startup trading firm at the Chicago Board of Trade. He took advantage of this rare opportunity, curious to learn more about capital markets. Dejan’s technical background provided a unique skill set, and by the end of his rookie year, he routinely transacted over $1 billion in U.S. Treasury notes daily, making him one of Chicago’s biggest bond traders. He consistently earned the highest profits for the firm for many years and continued to advance professionally in the trading arena.
With newfound experience and insight, Dejan came to realize his parents were being exploited by their financial advisor and that the financial services industry does not work in your best interest. After earning his MBA from the University of Chicago Booth School of Business, Dejan left the trading industry to start an independent financial advisory firm based on integrity and transparency and built on the belief that everyone deserves trusted, knowledgeable financial advice—blending Wall Street expertise with Main Street values.
Serving the broader community as an investor advocate, a proponent for financial literacy, and sponsoring nonprofit initiatives, Dejan is a trusted subject matter resource for many financial news media publications. He and his wife, Daniela, reside in Munster, Indiana, with their two kids. In his free time, he enjoys road cycling, reading, playing soccer, traveling, going on adventures (even skydiving!), and serving local charities. To learn more about Dejan, connect with him on LinkedIn.
