Markets in a Minute

U.S. Economic Forecasts: What’s the Probability of a Recession in 2024?

Published

7 months ago

October 3, 2023

Dorothy Neufeld

Visualized: U.S. Economic Forecasts, in 2024

For much of the last year, recession fears have been building against a sharp rise in interest rates and market uncertainty.

Only recently has there been a shift in sentiment. Given the resilience of the U.S. economy, a growing amount of investors are seeing an increasing likelihood of a soft landing—where the Federal Reserve raises interest rates to combat inflation without triggering a recession. However, many still remain cautious.

This graphic shows U.S. economic forecasts across Wall Street, Main Street, and C-Suite for 2024.

U.S. Economic Forecast: Is a Recession Coming?

Here’s what key players are projecting for the economy:

Forecaster	Estimated U.S. Recession Probability (Next 12 Months)
Federal Reserve Staff	0%
Yield Curve*	61%
Economists	48%
Consumers	69%
Goldman Sachs	15%
Bank of America	35-40%
CEOs**	84%

Source: Federal Reserve Bank of New York, Wolters Kluwer, The Conference Board, Goldman Sachs Investment Research, Bank of America. Data based on surveys and projections conducted August-September. *Based on a New York Fed model estimating recession probabilities using 10-year minus 3-month Treasury yield spreads, based on data from 1959-2009. **Conference Board Q3 CEO survey probability of a recession over the next 12-18 months.

In July, the Federal Reserve staff announced that they were no longer forecasting a recession in 2024, marking a sharp departure from earlier projections.

While the Fed staff continue to share a brighter outlook, the yield curve spread between 10-year and 3-month Treasury rates suggests there is a 61% change of a recession in the 12 months ahead. Historically, the yield curve has been a reliable predictor of recessions, based on a New York Fed model which uses data from 1959-2009.

Meanwhile, a survey of economists by Wolters Kluwer shows that they’re split, with 48% calling for a recession over the next 12 months.

Across Main Street, consumers share a more cautious sentiment, with over 69% saying that a recession is likely in the next year, based on a Conference Board survey.

Yet corners of America’s C-suite have grown more positive. Goldman Sachs recently dropped its recession forecast to a 15% likelihood while Bank of America gives it a 35-40% odds. On the other hand, 84% of CEOs are preparing for a recession in the next 12-18 months, a drop from 92% seen in the second quarter of 2023.

Bull Case vs. Bear Case Signals

Among the key factors investors are closely watching center around the impact of higher interest rates on the economy.

For the bull case, higher rates appear as though they haven’t significantly impacted consumer spending yet, although spending has slowed on non-essential items. Retail sales continue to be solid, and earnings across Home Depot, Walmart, Lowe’s, and other major retailers show resilience. Where the main changes are occurring are with consumers purchasing more affordable options.

However, consumers are relying increasingly on borrowing for spending.

For the bear case scenario, household debt has hit record highs of $17 trillion in March, rising 19% year-over-year. Higher rates have led these borrowing costs to jump, likely affecting household budgets. Meanwhile, corporate defaults have accelerated in 2023, and are projected to keep rising.

Overall, there are mixed signals across the wider economy. Quantifying the full effects of higher interest rates on consumers and businesses remains an open question.

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Markets in a Minute

The Top 5 Reasons Clients Fire a Financial Advisor

Firing an advisor is often driven by more than cost and performance factors. Here are the top reasons clients ‘break up’ with their advisors.

Published

2 weeks ago

April 15, 2024

Dorothy Neufeld

This circle graphic shows the top reasons for firing a financial advisor.

The Top 5 Reasons Clients Fire a Financial Advisor

What drives investors to fire a financial advisor?

From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for firing a financial advisor stem from emotional factors, and go beyond purely financial motivations.

We partnered with Morningstar to show the top reasons clients fire an advisor to provide insight on what’s driving investor behavior.

What Drives Firing Decisions?

Here are the top reasons clients terminated their advisor, based on a survey of 184 respondents:

Reason for Firing	% of Respondents Citing This Reason	Type of Motivation
Quality of financial advice and services	32%	Emotion-based reason
Quality of relationship	21%	Emotion-based reason
Cost of services	17%	Financial-based reason
Return performance	11%	Financial-based reason
Comfort handling financial issues on their own	10%	Emotion-based reason

Numbers may not total 100 due to rounding. Respondents could select more than one answer.

While firing an advisor is rare, many of the primary drivers behind firing decisions are also emotionally driven.

Often, advisors were fired due to the quality of the relationship. In many cases, this was due to an advisor not dedicating enough time to fully grasp their personal financial goals. Additionally, wealthier, and more financially literate clients are more likely to fire their advisors—highlighting the importance of understanding the client.

Key Takeaways

Given these driving factors, here are five ways that advisors can build a lasting relationship through recognizing their clients’ emotional needs:

Understand your clients’ deeper goals
Reach out proactively
Act as a financial coach
Keep clients updated
Conduct goal-setting exercises on a regular basis

By communicating their value and setting expectations early, advisors can help prevent setbacks in their practice by adeptly recognizing the emotional motivators of their clients.

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Markets in a Minute

The Top 5 Reasons Clients Hire a Financial Advisor

Here are the most common drivers for hiring a financial advisor, revealing that investor motivations go beyond just financial factors.

Published

2 weeks ago

April 15, 2024

Dorothy Neufeld

This circle graphic shows the top reasons for hiring a financial advisor.

The Top 5 Reasons Clients Hire a Financial Advisor

What drives investors to hire a financial advisor?

From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for hiring a financial advisor stem from emotional factors, and go beyond purely financial motivations.

We partnered with Morningstar to show the top reasons clients hire a financial advisor to provide insight on what’s driving investor behavior.

What Drives Hiring Decisions?

Here are the most common reasons for hiring an advisor, based on a survey of 312 respondents.

Reason for Hiring	% of Respondents Citing This Reason	Type of Motivation
Specific goals or needs	32%	Financial-based reason
Discomfort handling finances	32%	Emotion-based reason
Behavioral coaching	17%	Emotion-based reason
Recommended by family or friends	12%	Emotion-based reason
Quality of relationship	10%	Emotion-based reason

Numbers may not total 100 due to rounding. Respondents could select more than one answer.

While financial factors played an important role in hiring decisions, emotional reasons made up the largest share of total responses.

This illustrates that clients place a high degree of importance on reaching specific goals or needs, and how an advisor communicates with them. Furthermore, clients seek out advisors for behavioral coaching to help them make informed decisions while staying the course.

Key Takeaways

With this in mind, here are five ways advisors can provide value to their clients and grow their practice:

Address clients’ emotional needs early on
Demonstrate how you can offer support
Use ordinary language
Provide education to help clients stay on track
Acknowledge that these are issues we all face

By addressing emotional factors, advisors can more effectively help clients’ navigate intricate financial decisions and avoid common behavioral mistakes.

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