On Thursday, Macquarie updated its forecast for the US economy, signaling a more optimistic outlook than previously anticipated. The firm now expects a real GDP growth of 2.0% for 2024, a notable increase from the earlier forecast of 0%. This revision follows recent data suggesting stronger support for US growth in the upcoming quarters.
The unemployment rate is also projected to remain steady, with Macquarie anticipating it to hover around 3.7% through the end of the year, adjusting from the previously expected 5.2%. This outlook of a stable labor market has led to a change in the forecast for the Federal Reserve's policy actions. Macquarie now predicts only 50 basis points (bps) of rate cuts in 2024, a significant decrease from the 225 bps previously forecasted, and a total of 100 bps over the 2024/2025 period.
In light of the resilient growth, Macquarie foresees the Federal Open Market Committee (FOMC) revising its neutral rate estimate upwards in the coming quarters. The firm believes that a higher policy rate will be necessary to maintain inflation on a trajectory to return to the Federal Reserve's target. As a result, Macquarie's forecast for 4Q24 core PCE inflation remains unchanged at 2.3% year-over-year.
Despite the improved forecast, Macquarie remains cautious, acknowledging the inherent uncertainties and risks within the business cycle. The economy is not entirely clear of potential downturns, but based on the recent months' data, the firm no longer considers a mild recession the baseline scenario for 2024 or 2025.
InvestingPro Insights
Reflecting on the optimistic economic outlook presented by Macquarie, it's worth considering how this translates to market performance, particularly for widely followed indexes like the SPDR S&P 500 ETF Trust (SPY (NYSE:SPY)). With Macquarie forecasting a real GDP growth of 2.0% for 2024, investors might be interested in how this could impact their investment strategies.
The SPDR S&P 500 ETF Trust, as a barometer for the overall market, has shown resilience with a P/E Ratio of 6.22, indicating an attractive valuation in relation to earnings. This could be a signal to investors that the market is reasonably priced, which aligns with the positive economic indicators mentioned. Moreover, the SPY's Market Cap (Adjusted) stands at a robust 486.01B USD, reflecting its significant presence in the market.
Investors looking for stable returns might be encouraged by the SPY's consistent dividend payments, with the ETF having maintained dividend payments for 31 consecutive years—an InvestingPro Tip that highlights its reliability as a source of income. Additionally, the SPY has raised its dividend for 14 consecutive years, suggesting a commitment to returning value to shareholders.
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As the economic landscape evolves, staying informed with real-time data and expert insights from InvestingPro could be crucial for investors looking to capitalize on the growth potential suggested by Macquarie's updated forecast.
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