The first quarter ushered in a run of healthy growth for the U.S. economy, somewhat unexpected given wide-spread concerns that it could weaken. Job creation and labor force participation are exceeding expectations, wages continue to rise, and consumer sentiment has reached new highs, all boosting the supply-side of the economy. As noted recently by JP Morgan, “So far in 2024, there are signs that U.S. growth is still strong, and that growth in the rest of the world may start to accelerate.” While economists on the whole agree the inflation-surge has passed, opinions are mixed on the extent to which – if at all – rates will be cut this year. Down considerably from its peak, inflation still remains above the Fed’s 2% target, yet a healthy economy likely reduces any sense of urgency to cut rates further. While geopolitical tensions and the upcoming election are likely to cause intermittent volatility, recession risks are relatively low, and an overall positive performance can be expected in the near term.

From a local standpoint, the Palm Beach residential real estate market continues to reflect both sustained demand and constrained supply. Although the year started off slow, the second half of 2023 showed increased momentum in transaction volume, dollar volume, and pricing, a pace we expect to maintain in 2024. And while conditions have cooled from the frenzy witnessed at the start of covid, prices and overall dollar volume remain considerably elevated from pre-pandemic levels. Continually the beneficiary of in-migration and increasing population, and as a highly desirable destination to live, work, and play, Palm Beach is poised to perform positively in 2024.

President Daniel Pinto of JP Morgan Chase & Co. spoke about the vulnerability of the robust U.S. economy to political and economic risks. He noted that while consumers and businesses are strong, with high levels of savings and robust finances, issues such as persistent high inflation and elevated or still-increasing interest rates would create additional stress. Pinto also noted how a string of geopolitical risks, including the Russian invasion of Ukraine, the Hamas attack on Israel, and issues surrounding the US/China relationship, could trigger a deterioration of the economy (Bloomberg). Meanwhile, locally, inventory remains constrained and often uninspiring, yet demand for premium housing is robust. This favorable supply/demand ratio has continued its upward pressure on pricing, with Q3 witnessing the highest averages and median prices on record. By the end of Q3 2023, the Palm Beach real estate market had amassed sales exceeding $1.5B in total dollar volume, more than year-end totals for all pre-pandemic years recorded. As a safe haven and highly desirable destination, continuously the beneficiary of accelerating in-migration and widespread investment, demand in and around Palm Beach is poised to continue for the foreseeable future.

The first half of 2023 was marked by continued economic uncertainty, having endured four U.S. bank failures, fears over debt ceiling negotiations, rising geopolitical uncertainty, and lingering concerns over inflation and rising interest rates. Despite the likely challenges still ahead, there are signs of a resilient economy: the S&P 500 had its 4th-best first half in the last 25 years, the labor market remains strong, consumers continue spending on big-ticket services and commodities, and corporate debt levels appear stable (J.P. Morgan). While the Fed decided against an additional rate hike at the recent June meeting, further tightening is possible in the months ahead, though at a slower pace than what’s been experienced over the last 16 months. Recession fears persist, but there remains hope for a soft landing, with marginal economic growth expected in the quarters ahead.

The first quarter of 2023 has seen a continuation of the economic uncertainty witnessed at year end 2022. The recent failures of Silicon Valley Bank and Signature Bank, and the forced merger of Credit Suisse have further rattled financial markets, and are likely to curb credit extension, impair growth, and potentially increase recession risk (Northern Trust). While U.S. inflation eased to 5% in March, its lowest level in two years, it remains well above the Fed’s 2% target, and another quarter point hike is on the table for May’s meeting. Although Chairman Powell confirmed risks are higher today, he believes “the path to a soft landing” is still possible, and that a recession would be “mild.” Jamie Dimon, J.P.Morgan CEO, echoed some optimism, highlighting the resiliency of consumer spending, the current strength of the job market, and low unemployment. “Looking ahead,” he says, “the positives are huge.”

2022 proved one of the more challenging years in recent history for investors, with economic uncertainty prolonged by high inflation, subsequent interest rate hikes, equity market volatility, geopolitical tensions, supply chain disruptions, and Russia’s ongoing war in Ukraine, all amidst the backdrop of a global post-pandemic recovery. While many experts believe inflation has peaked and will be lower in 2023, it’s likely not low enough to ward off the Fed, and signals, in part, a weakening economy. Hence the continued debate among major banks about the outlook of a recession, which, if unavoidable, is generally predicted to be shallow, mild, and short-lived. As noted by Northern Trust, “High-frequency readings of consumer spending and business investment are still showing growth, and the current risk of a downturn is low…the window to a soft landing remains open.” On a global level, markets are seeing some positive shifts with China’s recent removal of covid restrictions, which should provide a boost to the Chinese and global economy through 2023, and European markets appear off to a strong start.