Good morning.
This week, I’ve been sharing predictions for 2024 from CFOs and industry analysts—and I think a veteran market watcher’s economic forecast also provides some food for thought.
"We do have a slowing economy now," Wharton finance professor Jeremy Siegel said last week on the Wharton Business Daily radio show. The Federal Reserve must realize that "all its tightness is in the pipeline and will press on the economy in 2024, so they have to start thinking about lowering rates," Siegel said.
In its Dec. 13 meeting, the Federal Reserve announced it would leave the benchmark overnight borrowing rate unchanged—the third straight pause since July—in a targeted range from 5.25% to 5.5%, signaling possible cuts later this year. (Inflation remains above the 2% target set by the Fed, which next meets Jan. 30-31.)
Bu inflation is basically beat, Siegel said. “There will be core elements in the CPI that will continue to rise, and institutionally determined prices that take months to come down, but to eliminate those remaining price increases would mean crushing the economy—and that would be inadvisable from an economic standpoint," he said.
“My big hope is that the Fed doesn’t get stuck on the downside and delay [taking action] the way it did on the upside, tightening way too late in [2021 and 2022],” Siegel added. “Even if they don’t lower interest rates in January, they may have to lower it in the March meeting.”
The Dow Jones Industrial Average closed the year at 37,689. On Thursday, it closed at 37,440.
“We could definitely get it past 40,000,” Siegel continued. "A 10% to 12% rise in stock prices is not out of the question for 2024.”
But, he added, that may be contingent on declining interest rates. “If the Fed is stubborn and says, ‘I’m just going against inflation, even if the data gets soft,’ those figures would have to be adjusted downward...if the Fed keeps money [supply] stagnant, as it has been, you are looking at a recession right in the face. That is why the Fed must ease."
Productivity gains seen in 2023 also may continue, and "we could have higher labor force participation,” Siegel added. The Bureau of Labor Statistics’ final jobs report for 2023 is set to be released this morning.
ADP’s monthly analysis of payroll data released on Thursday found around 164,000 jobs were created in the private sector last month, up from 103,000 in November, and annual pay rose 5.4% year over year. "We're returning to a labor market that's very much aligned with pre-pandemic hiring," Nela Richardson, ADP's chief economist, said in a statement.
Readers predict: Earlier this week, I asked readers for predictions on how the CFO role would continue to change. Here's one response about how artificial intelligence could prove a factor:
"As companies get to understand the inestimable value of AI and begin to gradually adopt and implement it, CFOs will have a lot to grapple with, especially with budgets to fund safety and protection of company data." —Helen Uju Ogboh, group head (manufacturing), corporate banking directorate, First Bank of Nigeria Limited
Have a good weekend.
Sheryl Estrada
sheryl.estrada@fortune.com
