Buy stocks because a recession is extremely unlikely in 2024, according to a

• Investors should buy stocks in 2024 because a recession appears unlikely, according to the Carson Group.

• Easing financial conditions and a pickup in the housing market should bode well for the economy this year.

• “With markets expecting the pivot sooner rather than later, we’re already seeing previous headwinds fading,” Carson Group said.

Investors should buy stocks in 2024 because an economic recession appears increasingly unlikely, according to a recent note from the Carson Group.

A proprietary indicator developed by investment strategists at the Carson Group shows that economic activity in the US and globally is growing along its long-term trend.

That’s in sharp contrast with the Conference Boards’ popular Leading Economic Index, which has declined for 20 months in a row and has wrongly suggested that a recession is imminent for more than a year.

While the LEI is made up of 10 components that mostly focus on the goods economy, Carson Group’s index has more than 20 components and is weighted heavily on consumer-related sectors.

“Right now, the situation looks better than it did a year ago,” Carson Group’s global macro strategist Sonu Varghese said.

And that’s because the average US consumer is doing great. Real incomes have been rising, the unemployment rate is at multi-decade lows, and consumer balance sheets are the strongest they have ever been.

“In a nutshell, the consumer has driven the recovery and carried the economy through last year. That’s in the face of major headwinds, mostly driven by a very aggressive Federal Reserve – which adversely impacted financial conditions and borrowing costs, housing, and business investment and manufacturing,” Varghese said.

The outlook for the US consumer could get even better if interest rates and inflation fall, which is increasingly expected among economists and investors.

While consumer inflation picked up more than expected in December and remains above the Fed’s 2% target, it has fallen sharply since 2022. The latest reading on wholesale inflation also showed it was subdued last month.

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“The good news is that with inflation pulling back, we see the Fed cutting rates in 2024. With markets expecting the pivot sooner rather than later, we’re already seeing previous headwinds fading, and that in itself is a big deal for the economy,” Varghese said.

Falling interest rates should revitalize the housing market, while easing financial conditions should be a boon for businesses. That’s as manufacturing activity appears to have already bottomed in 2023.

All of this suggests to Varghese that an economic recession is increasingly unlikely this year. And that should bode well for the stock market.

“As a result of the global economic backdrop, we start 2024 overweight stocks relative to bonds in our portfolios. And within stocks, we are overweight US stocks,” he said.

Read the original article on Business Insider