The economy is in recession, the stock market is down, the real estate market is down. From December 19th (newport beach independence):
- Economic slowdown: The U.S. could slip into recession and consumers are expected to run out of savings, leaving only one quarter of positive GDP in 2024.
- Corporate layoffs and unemployment: Corporate layoffs are expected to push up the unemployment rate, but the unemployment rate is expected to remain below 5%.
- Federal Reserve policy: The Federal Reserve may raise interest rates by 25 basis points, but may begin to cut interest rates in mid-to-late 2024. Unless a global crisis occurs, the rate cut will not exceed 75 basis points.
- Stock and bond markets: Stock markets are expected to experience a 15% sell-off over the next six months, followed by a modest rebound when rate cuts begin. The bond market is expected to show positive growth in 2024 after three consecutive years of declines.
- Housing market: Home prices could fall by up to 10%, but limited inventory should provide some flexibility.
- Commercial Real Estate: Commercial real estate values are expected to continue declining, with multifamily likely to underperform after a decade of strong performance.
As I noted yesterday, the median survey of professional forecasters points to no quarter of negative growth, while the flash forecast points to positive growth in the second quarter.
figure 1: GDP (black bold), May SPF median (light blue), GDPNow at 5/16 (blue square), New York Fed 5/17 live forecast (green triangle), St. Louis Fed 5/ 17 Live forecast (tan squares), all in 2017 billions of dollars, SAAR. Source: BEA Q1 2024 Advances, Philadelphia Fedthe Federal Reserve Bank of Atlanta, the Federal Reserve Bank of New York, the Federal Reserve Bank of St. Louis (via FRED), and the author's calculations.
Therefore, the first prediction seems unlikely to come true.
On the unemployment rate front, the SPF expects unemployment to rise, but Far Less than 5%.
figure 2: Unemployment rate (bold black) and May SPF median forecast (light blue), both in percentages. Source: Bureau of Labor Statistics, Federal Reserve Bank of Philadelphia.
What about the 15% sell-off? It's unclear what the 15% discount refers to; I'm assuming this is December 2023 levels.
image 3: S&P500 (bold black) and Hovde's forecasts (red squares). The May observation period ends on May 16. Source: FRED and author's calculations.
Finally, how is the real estate market? The 10% price drop is for 2024, so I think the 10% drop is lower than December's levels.
Figure 4: S&P Case Shiller 20-city house price index sa (black bold) and Hovde's forecast (red squares). Source: FRED and author's calculations.
