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By:
www.ProfitableInvestingTips.com
Investors are generally happy that the worst
fears of runaway inflation versus a severe
recession were not realized in 2023.
Nevertheless, there are still economic and
investment risks for 2024 to be considered.
The US economy has been more resilient
that many expected through 2023 which
has kept investors positive about the stock
market.
Looking ahead there are three distinct risks
to consider. Consumers are not obliged to
keep spending at the current rate.
Financial system liquidity is not guaranteed
going into next year. And the current
uprising in the House of Representatives
could lead to a substantial reduction in
federal government spending.
How Long Can Consumers Keep
Spending?
The Covid pandemic created a unique situation.
People spent months cooped up at home.
Spending patterns were distorted. Many folks
saved their money and only started to spend once
the shutdowns ended. Some of this catching up on
spending is still going on. But it is certain to end.
This is the first of the economic growth trends
that is at risk of unwinding in 2024. There is about
a third a trillion dollars in American household
savings that is steadily being spent and due to run
dry somewhere in 2024. Combine this with rising
credit card debt and we have the prospect of an
economic slowdown next year.
How Liquid Is the US Financial System?
As the US borrows more and more to finance
its debts that draws capital away from other
investments. A foreign issue that has some of
the same effect is the Bank of Japan raising
interest rates. This will divert some of the
money that normally would have been
invested in the US toward investments in
Japan. The end result will be less money
available for borrowing in the US and higher
rates. This could have the effect of slowing
the US economy and dragging down the
stock market.
Less Governmental Spending Could
Slow the Economy
Government spending associated with
Biden’s economic agenda has pumped
money into the economy. This includes the
CHIPS act and infrastructure spending.
Meanwhile, US government debt has been
downgraded due to the actions and
inactions of the traveling circus in
Washington known as the House of
Representatives.
The amount of US governmental spending is
a valid issue as is the unwillingness to tax
at a sufficient level to pay for governmental
programs. The combination of more
trouble with government shutdowns and
reduction of any number of spending
programs has the potential to drag down
the economy just as consumers are
backing off and there is less liquidity
available.
Investment Outlook for 2024 and
Thereafter
The US learned a lesson from how it dealt with
the 1929 market crash and following financial
crisis. The Smoot Hawley act that picked a
trade war with Europe devasted economies
on both sides of the Atlantic and was a major
cause of the Great Depression. The urge to
“punish” those who had borrowed and were in
financial dire straits at the start of the 1930s
likewise lead to the worse economic situation
of the century.
It was good fortune that the head of the US
Federal Reserve during the Great Recession
had studied the Great Depression and knew
that the cure was to support credit and keep
businesses afloat. Ben Bernanke along with
Henry Paulson at the US Treasury were
instrumental in keeping the Great Recession
from being a repeat of the Great Depression.
Sadly, that lesson is being ignored by many
with the ability to either drive or thwart US
economic policy.
The amount of US debt and continually
spending more than we collect in taxes is a
real problem. However, a genuine threat to
the economy and investments is the
unwillingness in Congress to balance the
budget with a judicial mix of taxes and
budget cuts. This, in our view, is the main
threat to investment in 2024 and going
forward.
For more insights and useful information
about investments and investing, visit
www.ProfitableInvestingTips.com.

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Economic and Investment Risks for 2024

  • 2. Investors are generally happy that the worst fears of runaway inflation versus a severe recession were not realized in 2023. Nevertheless, there are still economic and investment risks for 2024 to be considered. The US economy has been more resilient that many expected through 2023 which has kept investors positive about the stock market.
  • 3. Looking ahead there are three distinct risks to consider. Consumers are not obliged to keep spending at the current rate. Financial system liquidity is not guaranteed going into next year. And the current uprising in the House of Representatives could lead to a substantial reduction in federal government spending.
  • 4. How Long Can Consumers Keep Spending?
  • 5. The Covid pandemic created a unique situation. People spent months cooped up at home. Spending patterns were distorted. Many folks saved their money and only started to spend once the shutdowns ended. Some of this catching up on spending is still going on. But it is certain to end. This is the first of the economic growth trends that is at risk of unwinding in 2024. There is about a third a trillion dollars in American household savings that is steadily being spent and due to run dry somewhere in 2024. Combine this with rising credit card debt and we have the prospect of an economic slowdown next year.
  • 6.
  • 7. How Liquid Is the US Financial System?
  • 8. As the US borrows more and more to finance its debts that draws capital away from other investments. A foreign issue that has some of the same effect is the Bank of Japan raising interest rates. This will divert some of the money that normally would have been invested in the US toward investments in Japan. The end result will be less money available for borrowing in the US and higher rates. This could have the effect of slowing the US economy and dragging down the stock market.
  • 9. Less Governmental Spending Could Slow the Economy
  • 10. Government spending associated with Biden’s economic agenda has pumped money into the economy. This includes the CHIPS act and infrastructure spending. Meanwhile, US government debt has been downgraded due to the actions and inactions of the traveling circus in Washington known as the House of Representatives.
  • 11. The amount of US governmental spending is a valid issue as is the unwillingness to tax at a sufficient level to pay for governmental programs. The combination of more trouble with government shutdowns and reduction of any number of spending programs has the potential to drag down the economy just as consumers are backing off and there is less liquidity available.
  • 12. Investment Outlook for 2024 and Thereafter
  • 13. The US learned a lesson from how it dealt with the 1929 market crash and following financial crisis. The Smoot Hawley act that picked a trade war with Europe devasted economies on both sides of the Atlantic and was a major cause of the Great Depression. The urge to “punish” those who had borrowed and were in financial dire straits at the start of the 1930s likewise lead to the worse economic situation of the century.
  • 14. It was good fortune that the head of the US Federal Reserve during the Great Recession had studied the Great Depression and knew that the cure was to support credit and keep businesses afloat. Ben Bernanke along with Henry Paulson at the US Treasury were instrumental in keeping the Great Recession from being a repeat of the Great Depression. Sadly, that lesson is being ignored by many with the ability to either drive or thwart US economic policy.
  • 15. The amount of US debt and continually spending more than we collect in taxes is a real problem. However, a genuine threat to the economy and investments is the unwillingness in Congress to balance the budget with a judicial mix of taxes and budget cuts. This, in our view, is the main threat to investment in 2024 and going forward.
  • 16. For more insights and useful information about investments and investing, visit www.ProfitableInvestingTips.com.