financial planner Stephen Zelcer
TSP Report on Economic Forecast

TSP Report
2024 Economic Forecast

2024 Economic Forecast – 8 Areas of Macro-Economic concern for the US:

2023 was a challenging year economically, but you wouldn’t notice that from the stock market.  S&P500 ended 2023 up 24%. You’d think there’s nothing wrong with the economy. 

However, there are fundamental issues with the economy.  We may not have felt these issues in 2023 because many of the issues were already present before 2023 – contributing to the market drop of 18% in 2022.   2023 can be viewed as a year where people started to accept the new economic reality, allowing a market recovery.

However, below I will show that there’s still a laundry list of economic woes – I count at least 8 of them – some old and some new, and some of them are coming to roost quite soon. 

Although I’m not an economist, the domino affect that I will outline below is almost intuitive.

Elevated inflation: 

The rise of costs is not as steep as it used to be.  Last year, CPI (the national measure of inflation) came in at 8.7%.  This year, CPI came in at 3.2%.  Clearly inflation has subsided, right?

While prices are not rising as steeply as they did last year, the cost of goods has not come down

CNN reports from the Bureau of Labor & Statistics that 90% of the items tracked in the Consumer Price Index are more expensive in 2023 than they were in February 2020, and most of these items have increased by more than 20%.  Food prices are nearly 25% higher.  Gas is nearly 55% higher.

Has your income increased by 20%, 25% or 55%?

Rising costs on basic goods makes people’s cashflow tighter.  Unless they see a pay increase that keeps up with the new cost of goods – many (if not most) people will need to scale back their discretionary spending to be able to afford the basic cost of living.  Either that, or they will be relying on borrowed money.

Resumption of student loan repayments: 

Speaking of borrowed money, Student loans have been in forbearance since the start of the Pandemic.  It’s almost 4 years later and finally students will need to resume paying their student loans. (Why did we need to delay student loan repayment for 4 years?  I don’t have an explanation for this.)

If inflation has tightened people’s cashflows, adding a student loan payment will further tighten cashflows. 


Over the last six months, health care and government have accounted for almost two-thirds of all nonfarm employment growth, as noted by Vanguard.  This is not good for the economy. Let me explain: 

The government should only employ the people it needs to perform a job.  The government should not employ people just to stimulate the economy.  Let me explain:

Imagine a corporation of 100 employees which is operating smoothly with no inefficiency.  Each of the employees receives a salary, and the owner of the corporation enjoys a profit.

But the owner feels he wants to stimulate the economy and create new jobs.  He decides that instead of getting the job done with 100 employees -which was working just fine – they will get the job done with 200 employees without lowering anyone’s salary. 

In this example there is one person who is losing money – the owner.  The owner will have less profit. Why would the owner do that?  Because he wants to stimulate the economy – how charitable!

However, when it’s not a corporate owner being charitable, but rather it’s the Federal government being charitable – hiring more employees to produce the outcome that it was already producing with less employees, and without lowering anyone’s salary – who’s going to be losing money? 

It’s not nobody.  The money is coming from somewhere.  Where is it coming from?  It’s either coming from taxes or printing money – both is a loss to the American economy. 

  • Taxes hurt the wallet of the people who pay the taxes – meaning Person A loses money so Person B receives a salary. How ironic.  Furthermore, since Person A paid taxes, they have less money to buy a new couch, a new dress, a family vacation – which means the couch seller, dress seller, vacation seller have all lost money.  So, the Government “creating” jobs just means we stimulate one person’s finances by hurting other people’s finances.  Here’s a good article that explains this basic economic outcome.
  • Printing money just causes inflation. We’re all painfully familiar with that. 

So, if unemployment is staying level because the government is “creating” jobs, this is simply going to help one segment of the US economy by stifling another part (or many parts).  The American people will end up paying for these new jobs in the form of taxes or inflation – both of which put even more pressure on the already-suffering cashflow. 

Rising consumer debt: 

Those with tighter cashflows may need to borrow money to help them on a month-to-month basis.  Borrowing money can come in many different ways.  One way, possibly the easiest way, is with credit card debt. 

According to the NY Fed, Credit Card debt rose 4.7% in 2023. 

Credit card debt is usually high-interest. According to Lending Tree, the average credit card interest rate is 24.59%.  Even those credit cards that offer low rates, those are usually introductory offers which eventually turn into high interest.  Credit cards with high interest may provide lower monthly obligations, but the high interest compounds and future savings is jeopardized.  

It would be helpful if creditors could consolidate their high-interest debt into lower interest debt, but there’s just one problem.  Interest rates are super-high. 

High interest rates:

In 2023, we saw the stock market go up despite the steep rise in interest rates.  Mortgage interest rates in January 2023 were just above 5%.  Mortgage interest rates in November 2023 were above 8%. 

Vanguard expects central banks to cut interest rates, in 2024, which could bring mortgage back down to 7%.  It’s true, 7% is better than 24% credit card interest, but this is still quite costly to individuals and businesses.  If individuals or businesses cannot afford their debts, they will either spend less, which will not stimulate the economy, or they will default on their loans. 

Rising Defaults:  

The natural result of being unable to afford your debts is to default.  Fitch, and other outlets, have written about the forecast of increasing the defaults in 2024. 

The Financial Times reports, based on Federal data, that auto-delinquencies of over 90-days has reached its highest level in 13 years.

Real Estate Defaults are also very concerning.  I mentioned this a couple of times in prior reports.  I gave the following illustration:

Typical commercial real estate loans have a 5-yr term.  That means, in 5-yrs they need to be either satisfied or refinanced.  

However, when it’s time to refinance, instead of holding a 4% mortgage from 2018, they are forced to refinance into an 8%+ mortgage in 2023.  That, by itself, is a challenge. However, it gets worse. 

Commercial real estate values have declined.  A building that was bought for $10M in 2018, may now be worth $8M in 2023.  Assuming a 20% LTV, the loan on that original $10M property was $8M.  When it comes time to refinance, if the property is now valued at $8M, the LTV would only allow a loan of $6.4M.  That means the property owner needs to somehow find $1.6M of cash just to refinance the original $8M loan.   

When confronted with this decision – either cough up another $1.6M and refinance into costly 8%+ loans, or cut your losses and walk away – it’s not hard to foresee many owners walking away from their loans, and defaulting.  

Election year: 

The upcoming election may actually bring a bright spot into the economy.  Politicians, in their eagerness to buy votes try to stimulate the economy by either lowering interest rates or lowering taxes.  Depending on who gets elected and their agenda we can either stabilize the economy or totally rock the boat.  This is a wait-and-see. 


Wars disrupt economies, create uncertainty and are usually reflected in the short term after the start of the war. However, after the war, and even during the war, economies make their adjustments, companies continue to seek ways to be profitable, and investors eventually regain confidence and buy up the market, again.  We’ve already spoken about the short-term and long-term affects of war.  See this article for a fuller picture. 

Bottom Line:

You can argue that many of these issues have already been factored into the performance of stocks.  Many of them contributed to the 18% drop of 2022.  However, not everything has been baked into the cake.  The severity of loan defaults is a wait-and-see, the exacerbation of war is a wait-and-see, and certainly the election is a wait-and-see. 

If you are within 5 years of retirement, you should email me to get a more customized recommendation.

If you have any questions, feel free to contact me.

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