Published Friday, January 19, 2024 at: 8:49 PM EST
Throughout most of 2023, the economy and stock market kept surprising economists and investors, repeatedly outperforming expectations, and 2024 is starting out by showing much the same pattern.
In early January, the 60 economists surveyed quarterly by The Wall Street Journal predicted a slowdown ahead, expecting the fourth quarter 2023 U.S. economic growth rate will come in at 1.65%, slow to 0.94% in the first quarter of 2024, and eke out a 0.55% growth rate in the second quarter before rebounding in the second half of this year.
Despite the tepid consensus forecast by leading economists, the stock market broke a record Friday by closing at a new all-time high price, and algorithmic-driven forecasts by the Federal Reserve Bank branches in Atlanta and New York are again predicting much higher forecasts than the consensus of leading economists.
The GDPNow forecast from the Atlanta Fed, powered by an algorithm that’s updated as new economic data comes in throughout every quarter, was released on Thursday and predicted at 2.4% growth rate in the fourth quarter of 2023. That’s much higher than the consensus forecast in The Journal as well as the Blue Chip Financial Forecasts survey of economists. In addition, the New York Fed’s Nowcast, which is based on an algorithm its staff developed independently, on Friday was also forecasting a 2.4% growth rate for the final quarter of 2023.
Since the pandemic struck the U.S. in early 2020, the Federal Reserve branch algorithmic-powered forecasts have been far more accurate in predicting the growth rate of the economy.
Economic growth drives corporate profits and profits drive stock prices. Investors are seeing the economy continue to outperform expectations. That’s why stock indexes broke the high set two years ago.
The Standard & Poor’s 500 stock index closed at an all-time high on Friday at 4839.81, up +1.23% from Thursday, and + 1.17% higher than a week ago. The index is up +116.31% from the March 23, 2020, bear market low.
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