The Rise of the “No Landing” Scenario: What to Expect for the U.S. Economy in 2024

The U.S. economy is facing a new narrative as experts shift away from the idea of a “soft landing” and towards a “no landing” scenario. With three hot inflation reports at the start of the year and continued signs of robust consumer demand, the outlook for the economy is evolving.

According to a recent poll by Deutsche Bank, nearly half of all investors expect a scenario where the economy continues to grow, unemployment stays low, but inflation remains an issue despite interest rate hikes by the Federal Reserve. This “no landing” scenario is gaining traction in the financial world.

Wells Fargo has also upgraded its outlook for the U.S. economy, predicting GDP growth of 2.5% for 2024 and a lower unemployment rate of 4.1%. However, this growth may come at the cost of slightly higher inflation, with the bank revising its CPI estimate to 3%.

Several factors have been attributed to the unexpected strength of the U.S. economy, including record fiscal spending, the resilience of the housing market, and even “greedflation.” Despite the Fed’s rate-hiking campaign, financial conditions remain accommodative, contributing to the economy’s outperformance.

Wells Fargo’s economists are optimistic about the growth and employment prospects for 2024, with an upgraded S&P 500 target and expectations for only two interest rate cuts this year. However, the strong retail sales report for March has raised concerns about potential inflation and the need for rate cuts.

Overall, Wells Fargo’s team expects a strong dollar, rising commodity prices, robust earnings, and relatively accommodative financial conditions in the coming years. With the possibility of geopolitical tensions and foreign wars, investors should prepare for volatility in the markets.