2024 is quickly coming to an end. It was a pivotal year on many levels, recovering quite nicely from an incredibly shaky economy in 2023.
In 2023, confidence seemed to fade, making way for fear, which always wreaks havoc on our economy. I have said many times that the psychology of the market often leads to actual market swings one way or the other, and 2023 proved once again that when fear rears its head, markets cool off very quickly. Conversely, 2024 had a very different feel to it.
In 2023 interest rates mushroomed in an effort to stave off inflation, causing a real slowdown in growth plans across the board. Commercial lending came to a screeching halt, as rising interest changed the math entirely for projects requiring outside funding. And for consumers, home mortgages went from a ridiculously low 3% to over 7%, within just a few months! Inflation was spiking and panic seemed to be seeping into the mindset of most households and businesses alike. This had a ‘sky is falling’ feel in both the business front and the home front.
2024 has been an entirely different animal. The “I’m going to hold off for now” which was the theme in 2023 being replaced with, “Yeah, let’s do this” in 2024 was a major and palpable difference. Now that the election is near, we are getting a bit more to ‘hold off’ until they can assess what lies ahead, but that is typical in an election year.
I point these things out because the cyclical nature of the economy is a reality we all must grapple with. It’s easy to get sucked into fear when things seem to be declining, and likewise, get overly confident when things seem to be on the rise.
People seem to feel brilliant when their homes and investments appreciate and become quite jittery when they see a downturn.
The discipline might be to be a little calmer in both circumstances, but that’s a tall order for we humanoids, who are subject to highs and lows based on our financial picture.
For what it’s worth, we are in the midst of relative stability economically. Interest rates have softened and are likely to drop even lower in the coming months. Unemployment is low, but not crazy low. It’s kind of a sweet spot right now, where there’s a decent balance between an employee market and an employer’s market. This was missing in 2020-2022, which was clearly an employee’s market. Now clients are sifting through a better selection as unemployment is more moderate at just over 4% instead of 3.5% from a couple years ago.
2025 is certainly in play, as our elections tend to have consequences, the extent to which we are unaware of at this moment, but if the interest rates continue to soften, unemployment remains steady, consumer confidence solidifies, I am confident that 2025 will continue the trends we saw gain steam in 2024 of growth and a flourishing local economy.
Let’s hope so.
