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--:-- John Bickley: With a new year upon us, questions about the U.S. economy abound. Will the housing market continue to stagnate? Will interest rates finally return to normal? Is Wall Street heading for a bear or bull market? And what about inflation? In this episode of Morning Wire, we'll pose these questions and more to two market experts who each have very different outlooks for the year ahead.
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--:-- John Bickley: I'm Daily Wire Editor-in-Chief John Bickley with Georgia Howe. It's January 14th, and this is a Sunday edition of Morning Wire. Here to discuss where the U.S. economy is heading in 2024 is Daily Wire senior editor Cabot Phillips.
--:-- Cabot Phillips: Hey, Cabot. So you spoke with two experts. So what did you learn?
--:-- Cabot Phillips: Yeah, when it comes to predicting which way the economy is trending, nearly everyone seems to have their own opinion. Some say we're doomed for recession. Others say we're out of the woods and headed for a year of growth. Some say the housing market is a bubble ready to pop. Others say it's that first strong year and that rate cuts will get the market firing up once more.
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--:-- Cabot Phillips: With that in mind, I spoke with two market experts, each with decades of experience for their thoughts on where we're heading. First was Joe LaVornia, who served as chief economist at the National Economic Council and is currently the head economist at SNBC.
--:-- Joe LaVornia: LaVornia is more in the bear camp, predicting a sluggish year across the board. The economic landscape is not good. It hasn't been good, I'd argue, for some time, but I certainly think it will be worse in a more traditional sense.
--:-- Joe LaVornia: And what I mean by that is we are going to see job losses alongside a rising unemployment rate. So the backdrop will deteriorate as we move through 2024. So, no, I'm definitely bearish on the economy and then by default bearish on the stock market.
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--:-- Cabot Phillips: I also spoke with Kenny Pocari, a market strategist and managing partner of Case Capital Advisors.
--:-- Kenny Pocari: Pocari is a self-described bull on the economy, and while generally optimistic about 2024, still does have some reservations.
--:-- Kenny Pocari: I feel fairly good about the economy. I'm a little bit cautious for the first quarter. I think we've already started to see some concerning forward guidance coming out of places like FedEx and General Mills and Nike. We saw that Walgreens cut their dividend by 50%. That's not necessarily a positive.
--:-- Kenny Pocari: You know, it's causing some angst, I think, in certain parts of the market. And I think that that's legitimate for the first quarter. So I remain a little bit cautious. Doesn't mean I think, you know, we're going to see the market crash or we're going to we're going to have this disaster happen. I don't think that at all.
--:-- Kenny Pocari: But I am just cautious as we get into the first quarter and then the next meeting, which is the end of January, to kind of get any more clarity, if at all. And then I think if we move through the year, I think the market will stabilize.
--:-- Kenny Pocari: I think we avoided the official recession, right? They didn't call it because we didn't have, you know, in 2023, we didn't have those two negative quarters. But remember, we did have those two negative quarters at the end of 2022.
--:-- Kenny Pocari: They also refused to call it then. And then that was a classic definition of a recession. Yet they refused to call it because, you know, they weren't sure and all that stuff. So, yes, in 23, we didn't have the classic definition of it.
--:-- Kenny Pocari: But I think what we saw was I think we started to see kind of rolling recessions in different industries as we went through the year, which means I don't think in 2024 that we're going to get a full-blown recession reminiscent of the 1980s, you know, where we went into a deep, dark recession for two years because the Fed had forced rates to 21 percent to counteract, you know, what was resurging inflation.
--:-- Kenny Pocari: I don't think we're going to see that. Then I think, you know, we come in for a softer landing, not a crash landing, not a hard recession, but a softer landing. I think there'll be bumps along the way. It's not going to be perfect, but it's not going to be the disaster that maybe people thought it was going to be, myself included, you know, at the beginning of last year.
--:-- Joe LaVornia: We avoided a traditional recession in 22, but we had what I would call an inflationary recession in a sense that real GDP contracted. Now, at the time, the argument was, well, if you look at the income side of the data, which is a corollary or a companion to the GDP data, which are more known, the income data did not show the weakness.
--:-- Joe LaVornia: And many highlighted that in the administration, for example, that the income numbers look solid. Well, if you look at the income numbers now, they're actually telling us we're probably on the cusp of recession. So I would say this backdrop is at best mixed. And at worst, as I said, it will be a downturn, will be a recession in a more traditional sense.
--:-- Kenny Pocari: We typically know history shows that the markets tend to do OK in a presidential election year. What the Fed should not be doing is they should not be adjusting monetary policy or playing with rates six months ahead of the election for fear of being viewed as being political, right?
--:-- Kenny Pocari: That they're trying to influence an election by using monetary policy and cutting rates and or they could be raising rates. If they were trying to get the incumbent out, they'd raise rates and make the economy more difficult. In this case, if they're going to cut rates, it would be viewed as being political.
--:-- Joe LaVornia: If the Fed does cut this year, which I'm expecting, this will be the first time since at least 1984 where the Fed initiated rate cuts in a presidential election year. So this is a very different backdrop today than we've had in very recent memory.
--:-- Joe LaVornia: We wrapped up by talking about the housing market, which exploded in 2021-22, but it really ground to a halt last year as rates shot up and inventory came to a historic standstill.
--:-- Kenny Pocari: We've already seen mortgages come back in from 8% where they were at the end of, you know, like kind of in October when the 10-year was ticking a little bit better than 5%. So we've seen mortgages go from 8% back down to 6.5% now for 30-year conforming money.
--:-- Kenny Pocari: So that's been a positive. And actually, again, you know, anywhere between 5% and 7% is also historically normal for mortgages, right? Mortgages at 2% or 2.5%, once again, were abnormal.
--:-- Kenny Pocari: And so housing prices took off as a result of money costing so cheap. What's going to have to happen is if mortgage rates stay where they are, you're going to have to see some contraction in housing prices. You have to. They can't. They're just unsustainable.
--:-- Kenny Pocari: People are not going to be able to afford it. And when it comes to fears of a collapse in the housing market, Pocari said he thinks certain pockets of the country could see a bubble getting ready to burst, but that nationally things should be a bit more stable.
--:-- Kenny Pocari: In parts of the country, I think there is a housing bubble. Other parts of the country, I don't think, ever got out of whack. So there's less of a housing bubble. So I think you have to look at where that action is.
--:-- Kenny Pocari: I think it's in some of the big cities. I don't know what's going on in Chicago. I can't imagine housing prices in Chicago going up, but I know certainly in New York they are. You can see it.
--:-- Kenny Pocari: And in places where you've seen a mass migration, so whether it's Texas, whether it's Florida, whether it's the Carolinas, where people moved away from either the Northeast or high-tax states during COVID, whatever, that they moved to these other parts of the country, that's where you saw it and that's where you see more of a housing bubble because there was actually this new demand in housing.
--:-- Kenny Pocari: But I think that's going to start to settle down as well because I know certainly down here. They're starting to build once again like crazy down here. And I live in South Florida. And so I do think over time, I don't think it's going to pop and crash like it did in 2007 and eight.
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--:-- John Bickley: Cabot, thanks for reporting. Anytime.
--:-- Cabot Phillips: That was Daily Wire senior editor Cabot Phillips. And this was a Sunday edition of Morning Wire. Thank you.
