In 2024, we believe markets will make a definitive turn to a more recognizable place. Where the last two years had investors focused on inflation, market volatility, and striving for a sense of economic balance, we expect to see some return to the previous status quo, characterized by more familiar and steadier economic and market patterns. We’ve seen indications of this reset—receding inflation, rates stabilizing, more modest stock market performance, and go-forward economic forecasts that have been dwindling.

It doesn’t mean that 2024 won’t have its own surprises or potential challenges. Reflecting on 2023, we certainly experienced our fair share of unexpected events. There were positives, such as the strength of the U.S. economy and the stock market, despite the Federal Reserve (Fed) raising interest rates. On the downside, we faced a regional banking crisis driven by interest rate risk and saw escalating conflict in the Middle East, reminding us that markets are seemingly constantly overcoming obstacles.

So where does that leave us for the first half of 2024? We do expect the economy to soften mildly, which is what the Fed has been looking for over the past two years. The uncertainty surrounding a potential recession may limit stock gains as 2024 begins, but it could also provide a silver lining if the Fed eases rates as a result.

The rate and earnings cycles are likely to have a greater impact on stocks, as investors focus on the anticipated decline in interest rates and return of growth in earnings. With this in mind, we see growth opportunities in bonds, which should offer decent returns with lower risks compared to stocks. Ultimately, we expect both stocks and bonds to perform well and provide ample opportunities.

View the complete guide Outlook 2024: A Turning Point, featuring forecasts for stocks, bonds, and the economy, as your guide for 2024.