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A December to Remember - RMH Market Watch

Wow, what a December to Remember, and you thought one only heard this on Toyota Christmas commercials.

The most crowded trade of December 2023 was trading in anticipation of the FED’s forecasted rate cuts in 2024. We would like to point out to be careful about what one wishes for. In RMH’s opinion, if we receive all the FED rate cuts that people are forecasting, the U.S. economy will be in trouble. We believe there will be fewer rate cuts than expected. And a “little thing” called a presidential election will likely take rate cuts off the table from June through the first week of November, as the FED does not want to be accused of helping influence the election.

One of the most popular forecasts by analysts and talking heads in 2023 was that that rate increases by the FED would tip the economy into a recession.

What’s interesting about the above chart is that the National Bureau of Economic Research still has not called a recession. The last recession was the short-lived recession caused by Covid-19. Quite simply, there was not a widespread, long-term decline in economic activity in the US economy this year that fit the definition of a recession.

Early in 2023, RMH predicted no recession due to the earnings strength of the major companies. It is hard to have a recession if companies have earnings. We have the same thought for 2024, no recession.

One of the biggest factors that affected consumer strength in 2023 and resilience to rate hikes is the percentage of homes that are mortgage free.

Another key component to this is that consumers that do have mortgages on their homes took advantage of the low rates:

  • 91.8% of outstanding mortgage rates are below 6%

  • 82.4% below 5%

  • 62% below 4%

  • 23.5% below 3%

Consumer strength was underpinned by the fixed rate on their mortgages, and the individual consumer makes up two thirds of the US Economy.

Below are surprises from the last several years that still impacted us in 2023 or have the potential to impact 2024. In this context, a “surprise” is an event that goes against consensus forecasts or was not forecasted at all.

  • Ukraine/Russia continuing conflict             

  • China in a slowdown for 2023

  • Price of oil and natural gas lower vs. 2022  

  • Very rapid rise in US interest rates

  • Israel / Hamas, conflict                                

  • Consumer spending holding up

  • Lack of corporate defaults                          

  • Lack of real estate defaults  

  • US corporate earnings decelerated in 2022 

  • Deficiency of critical thinking at the highest levels of government across the world.


Throughout December and continuing into January, we will see a torrent of information as to the predictions for 2024 of the economy, inflation, job growth/contraction, US Presidential election cycle, and asset class predictions to name just a few. Keep in mind that most analysts do not like 1-year forecasts as they can be right as often as they can be wrong. The clients like them. Finally, it is very hard to predict the accuracy of the market with all of the variables to consider, and the totally unpredictable developments that occur each year.

Here are some of our thoughts:

First, the market is getting the number of interest rate cuts wrong.  The Fed has read history, and they realize they only get one shot at taming inflation for the long term. None of them want to make the same mistake as in the 1970’s, when inflation spiraled out of control. As we have mentioned in the past, the Fed has a dual mandate, full employment and keeping inflation under control. The Fed will slow walk the interest rate decreases, while trying to create a slowdown.

Second, the US will avoid a recession in 2024 as interest rates slowly decrease. When interest rates come down, cyclical parts of the economy such as housing, corporate investments, and vehicle sales will improve. Companies invest more in their companies with lower interest rates.

Third, earnings growth of 4 – 5% will show that most companies are concentrating on the bottom line. During the past two years, companies concentrated on restoring supply lines from the pandemic disruptions which exposed the weaknesses of the “just in time” inventory process being used in manufacturing. Remember the semiconductor shortages for all new automobiles?

Fourth, the US dollar will remain the world’s reserve currency. Not because of our fiscal responsibility, but because we have a large, well-diversified economy, and intellectual and physical property rights are protected, and a rule of law that is mostly followed

Fifth, the US is a large technology hub and raises the most dollars for venture capital which in turn creates disruptive technology, which then fuels growth looking 10 – 20 years into the future. AI, anyone?

Sixth, what will the markets do? What a great question. We believe we will have an up year for both equity and fixed income markets. How much? That is anyone’s guess. However, last year’s stellar returns borrowed some percentage gains from this year, in our opinion. The major points from above, lower interest rates, and increased corporate earnings will help.

Seventh, be prepared for the most expensive US election cycle ever, estimated to top $12B in spending, easily breaking the 2020 record. One reason to go to streaming TV. Here is some fun math: an estimated 335,000,000 people in the US as of 2023, 161,420,000 people are registered to vote, 66% vote, 90% of the population has already made up their mind, meaning $12b gets spent on 22,100,000 people or $1,126 per person to influence an election. Time for campaign reform and term limits anyone?

Eighth, the wildcard. Geopolitical. All comments from above are withdrawn if any of the current conflagrations escalate meaningfully.

In closing, we offer up this quote from Dwight Eisenhower: “In preparing for battle, I have always found that plans are useless, but planning is indispensable.

We thank you all for taking the time and reading “Market Watch.” It is meant as an educational piece on the always evolving markets. It is something we plan on providing every month, and your feedback is very important to us.

On a personal note, RMH is now in the position to bring on new clients so please be sure to share this informational letter with whomever you wish. RMH’s focus is on the customizable investment needs of individuals, families, and foundations. We enjoy working with our clients to better understand their goals, values, and passions for what is important in their lives. In expanding our client base, we look forward to working with people who share these same desires.

Richard Mundinger, CFA

Ashlyn Tucker


DataTrek, 12/22/2023: Story Time Thursday

Sam Ro. 12/10/2023: The economy has gone from very hot to pretty good.

Goldman Sachs, 10/22/2023: US Shale: The Marginal Supplier Matures


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