Good news! The recession you feared in 2023 may not materialize. While the U.S. economy could slow next year, our experts predict it will avoid a recession. This offers breathing room for your finances and investment decisions.

However, a shifting financial landscape demands attention. The key development? Rising bond yields. This impacts markets and your portfolio options.

J.P. Morgan’s Outlook 2024 report explores what a world with 5% interest rates holds. It highlights opportunities and challenges for investors:

U.S. Highlights:

  • Growth slowdown in early 2024 followed by a rebound later.
  • Fed making progress in curbing inflation: job market signals and wage growth cooling down.
  • Possible rate cuts by the Fed in late 2024, depending on inflation control.
  • Manufacturing construction booming thanks to government investments.

Global Highlights:

  • Global inflation moderating after central bank rate hikes.
  • High yields offering choice, but also impacting global economy and investor returns.
  • Governments incentivizing investments in key areas like technology and infrastructure.

Stocks vs. Bonds in 2024:

  • Bonds now more competitive with stocks due to higher yields.
  • U.S. aggregate bonds: estimated 5%+ returns over 10-15 years with lower volatility.
  • U.S. large-cap stocks: estimated 7% returns over the same period with higher volatility.
  • The choice depends on your risk tolerance and goals: prioritize downside protection? Lean towards bonds. Maximize potential gains? Favor stocks.

Cash in 2024:

  • Cash looks attractive, but expect it to underperform most asset classes.
  • Hold cash strategically: define a goal and allocate funds specifically for it.

Inflation in 2024:

  • Predicted to fall towards the Fed’s target (2% – 2.5%).
  • Keep an eye on potential pressure points: industrial policy, clean energy transition, and consumer expectations.

In conclusion, 2024 offers diverse investment opportunities in a shifting landscape. Understanding the impact of higher interest rates and carefully aligning your choices with your individual goals will be key to navigating this new environment.

Source: JP Morgan WM Outlook Report 2024