Hardwood Floors October/November 2024

By LPL Financial

While it’s tempting to forecast a continuation of these trends, our analysis suggests an impending shift. The economy looks poised to cool down in the second half, while volatility is likely to rise off of multi-year lows. Each outcome will impact both policy and markets. Here are a few of our thoughts on the economy, the stock market, and bond markets.

THE ECONOMY: A TALE OF PROLONGED

market’s expectations of numerous Federal Reserve (Fed) rate cuts were overdone in our view because inflation was sticky, and consumers still had money to spend. As of now, the markets perhaps have swung to the other extreme, with some even chattering about potential rate hikes. Again, we believe this is misguided. As of the writing of our annual outlook late last year, we thought “the U.S. could experience…an economic contraction…but still outperform other markets.” One sizable miscalculation was the extent to which consumers, particularly wealthier ones, could drive the economic growth engine despite high prices. We Have a Delayed Landing, But Still a Landing – Recent data on refinancing activity provides a clue on why the economy has experienced a delayed landing. The housing market often explains a lot of what is happening in other sectors of the economy, and this time is no different. Roughly one-third of mortgages were refinanced in the quarters following the pandemic recession of 2020. Because of 2020’s extremely low mortgage rates, these homeowners lowered their monthly payments, increasing their disposable income. Other homeowners took advantage of healthy home equity and took cash out to support more spending. In addition to the oft-mentioned excess savings from stimulus and temporarily curtailed spending, improved household financial conditions from low mortgage rates kept the economy out of the doldrums.

RESILIENCE, BUT A DELAYED LANDING ON THE HORIZON A Brief Look Back – The midyear outlook is an opportunity to revisit the forecasts we outlined in December 2023. The views are the same in many ways, but with a bit more nuance. As we said last year, rate cuts “may not come until the latter half of 2024, and the magnitude may not be anywhere near as aggressive

as markets think.” Indeed, this is still the case. As last year came to a close, the

the magazine of the national wood flooring association

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