2024 Credit Markets, Banking and Bankruptcy Outlook - Part I

For these reasons and more the spectre of a recession has haunted most of 2023 with conjecture moving from severetomild or no recession in 2024Despite these predictions and assumptions several areas of the US economic engine promise both good news and concern in 2024The Markets Inflation and Recession ConcernsThe US equities market is at a very different place than it was at the beginning of 2023 roaring back with a total return of about 24 yeartodate with the SampampP 500 less than 2 away from an alltime high The most recent rally in stocks and bonds was sparked by the Federal Reserveamp8217s Fed statement in December that interest rate hikes have ended and that it will seek to begin cutting rates in 2024 That situation is the polar opposite of 2022 when a series of interest rate hikes led to an 18 decline in the SampampP 500 indexMost market watchers expect the market and economy to grow further in 2024 albeit at a slower pace but there are still several areas to be concerned aboutInflation is down about a third from its peak of 9 in June 2022 The US economy as expressed in real gross domestic product GDP grew at 49 in the third quarter slightly below expectations of 52 growth However recent monthly data shows a slowdown in economic momentum posing a risk of recession While business spending particularly in manufacturing showed unexpected resilience declining corporate profits are dampening capital investments affecting overall growthConsumer activity was strong in the third quarter with robust job growth and higher wages Yet more evidence indicates that consumers are drawing down on savings and taking on more debt to sustain their current spending levels which will likely lead to a rise in delinquenciesWall Street has developed two views regarding the potential for a recession In the first scenario a mild recession beginning sometime later in 2024 given tighter lending conditions slows down the economy over the next few quartersHowever this first scenario is likely to be delayed if it materializes at all due to i resilience in automobile sales ii a robust labor market iii increased investment in technology and new factories and iv continued consumer spending Sustained demand remains for new homes even though higher interest rates and elevated housing prices make homeownership or relocations very expensive and especially out of the reach of younger potential homebuyersThe resilient performance of the US economy in 2023 together with a decline in inflation has instilled optimism for a mild economic recession and can be seen by a notable shift in sentiment marked by widespread upward adjustments to growth projections according to UBSHowever if historical trends hold up recession in some form is likely and might be delayed until 2025 In years when the yield for three and tenyear Treasuries is inverted as it was in March of last year recessionary effects followed 12 to 18 months laterIn scenario two in which top analysts at Goldman Sachs Morgan Stanley and JP Morgan are in consensus the US will not fall into a recession but will instead experience slow growth because of drags from a struggling commercial real estate market a poor outlook for housing and less government stimulusThis mixed bag of potential outcomes could make for a bumpy and volatile ride in 2024In part II of this series we will examine the topics of credit markets and banking defaults and bankruptcies and what whose who watch the credit markets should be most aware of in the coming yearAbout the authors This article was written by four credit markets experts from Alvarez ampamp Marsal Andrea Gonzalez Managing Director UCC Practice Mark Greenberg Managing Director UCC Practice CoChair Rich Newman Managing Director UCC Practice CoChair and Seth Waschitz Senior Director UCC PracticePosted at MediaVillage through the Thought Leadership selfpublishing platformClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillageorgMyersBizNetamp160

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2024 Credit Markets, Banking and Bankruptcy Outlook - Part I

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