How Investors Should Think About the 2024 Economy

In 2023, the global economy experienced general stability. Job growth was consistent, inflation slowed down a little, and employee earnings saw modest growth. While it was not what you could call a “boom year,” 2023 was a decent respite from the turmoil some experienced at the start of this decade.

With 2024 now upon us, experts are re-evaluating the economic trends they’ve watched develop in the last few quarters. Some see concerns about headwinds that could grow stronger through the year. 

Financial expert Ty J. Young, CEO of Ty J. Young Wealth Management, takes a look at what’s coming up this year and offers several strategies for withstanding the most dire result imaginable: a global recession.

General Trends in the Economy for 2024

The U.N.’s World Economic Situation and Prospects report for the new year offers a measured analysis of how the economy will develop in these 12 months. Although 2023 expectations were met and even surpassed a little, events and conditions in 2024 point to a higher sense of risk.

The U.N. believes that global gross domestic product (GDP) growth will slow down by around 0.3% in 2024. The U.S. faces a comparatively steep drop in GDP, from 2.5% in 2023 to 1.4%. In addition, a slowing labor market and higher interest rates could stall consumer spending, one of the economy’s biggest drivers.

Global inflation dropped to 5.7% in 2023; this year, it’s expected to fall to 3.9%. In the investment sector, Forbes magazine says higher interest rates will mostly stay in place in 2024. This makes bonds, especially short-term corporate bonds, interesting prospects in the new year. Rate hikes have encouraged success in high-yield savings bonds. Experts recommend increasing your contributions to Roth IRA accounts.

Could We See a Recession in 2024?

Experts also believe that warning signs of another recession might emerge as this year unfolds, even if the downturn doesn’t begin until 2025. The geopolitical climate, especially in the U.S., points to uncertainty. While the December jobs report was encouraging, experts believe employment may slow down a little in 2024. 

Ty J. Young believes it’s more likely the economy will endure 2024 without a two-quarter loss in GDP, which often precedes a recession. But the Federal Reserve is under the gun to get through the U.S. election without a recession, and the means they typically employ might not be the cure-all they hope it is. 

“Printing money is the go-to response of the government during an election,” Young says. “However, such money printing has already reached the tipping point, creating negative impacts on the bond market and creating rampant, massive inflation. That has the potential to generate stagflation and ultimately a recession due to the consumer being unable to keep up with rising costs.”

Young continued, “First quarter 2025, without a real budget through regular order and an Executive Branch committed to deficit reduction and industrial competition? It could get ugly.”

What Are Some Tips for Investment Success?

Whether a recession is imminent or not, investors will want to take certain steps to grow and protect their holdings in 2024. These steps are fairly straightforward.

Establish Reachable Investment Goals

Now is the time to set realistic goals for your investment accounts. Investors may want to pay off their high-interest credit debt, save up for down payments on homes or cars, or establish an emergency fund. Retirement investors need to decide how much they’ll need and set a date for accomplishing those goals.

Finalize an Effective Strategy

Strategy is an important factor in growing wealth. Even the most passive investor should have a grasp on some of the most basic strategies investors use: asset allocation, portfolio diversification, rebalancing, dollar-cost averaging, and more. These strategies are appropriate for both investment and retirement accounts and can shore up your resolve to become a conscientious, effective investor.

Hold Steady With Your Strategy

This year promises to be a wild ride for the economy. That has the potential to make investors panic and make hasty portfolio transactions. Emotion-based investing can be dangerous. Panic trading amplifies losses, discourages gains, and causes more investor anxiety — and more panic trading.

Do not let your long-term plans fall prey to emotions. No matter what, stay with the strategy you’ve finalized. You can and should review it every month, even making minor adjustments in certain areas. But always keep the big-picture strategy intact as much as possible.

Protect Your Fund With Innovative Financial Products

Sometimes, it’s wise to take a defensive, protective approach to your portfolio. Many rely on hedge funds, diversification, dividend-paying stocks, stress-testing, and other measures to isolate risk and grow wealth.

One of Young’s favorite instruments for protecting your funds is the fixed-income annuity. An investor makes a lump-sum premium payment to an insurance company that represents some of their retirement capital. The interest rates are locked in, which means that they won’t fluctuate as the market does. Fixed-income annuities are not dependent on the stock market, so they won’t crash if the market does.

“(A fixed-income annuity) helps an investor avoid stock market losses and grow their money at the same time,” says Young. “It’ll grow with the market as the market goes up and you don’t lose money when the market goes down. It’s a fantastic balance for the average investor.”

Stay on Top of Investments in 2024

The new year always brings out a sense of change, and change can be frightening. Even if we manage to avoid a recession in 2024 — which we think will be the case — 2025 looks more foreboding by the day.