After peaking mid-year 2022, inflation has been on a steady trajectory downward, ending 2023 in the low 3% range and approaching the Fed’s 2% target. As a result of moderating inflation, the Fed left rates unchanged during the fourth quarter with a Fed Funds rate of 5.25%. Expectations are that rates will fall throughout 2024 with a series of rate cuts beginning in March and optimism is increasing that the U.S. economy will avoid recession. These combined to drive strong returns in both stock and bond markets in the fourth quarter, leading to very good full year 2023 returns. Markets will be closely focused on economic data in the coming months in hopes that inflation will continue to be contained and the economy remains resilient.
“Inflation is taxation without legislation.”
Milton Friedman
