OpinionUS economy ends 2023 surprisingly strong, fueling momentum for 2024
Opinion
US economy ends 2023 surprisingly strong, fueling momentum for 2024
“We remain focused on supporting Israeli innovations in AI and other high-tech areas, recognizing the pivotal role these investments play in driving forward global advancements in technology,” writes Ira Robbins, CEO of Valley Bank
Volatility in the financial markets is nothing new.
I’ve spent almost 30 years in banking, witnessing several recessions, economic cycles, and banking crises. I understand how important it is to navigate through times like these for our customers and for our communities. And by all measures, 2023 was another extraordinary year.
Not just in the challenges we faced but in the way our economy remained resilient in the face of uncertainty. For instance, this past year the banking industry was turned on its head as we faced the largest banking crisis in more than a decade. Our economy continued to shift under the weight of an inverted yield curve, recessionary fears, inflationary pressures, wavering consumer confidence, and slowing demand. We have been plagued with partisan political infighting as a country and the growing fears of global instability amidst wars in Europe and turmoil in the Middle East.
A look back at 2023
Despite this myriad of challenges, the US economy managed to grow gross domestic product at a blistering 3.3% pace in the fourth quarter of 2023. Job gains continued at a very strong pace all through last year, although still down from the torrid rates we witnessed immediately following the pandemic. Simultaneously, inflationary pressures waned significantly, and the previously unthinkable “soft landing” scenario now seems entirely plausible. And while we experienced two equity market declines of 10+ percent, the general indexes were up meaningfully. In 2023, US startup funding experienced a 30% decline. However, one out of every three dollars was invested in AI, underscoring the dynamic opportunities for tech firms in this evolving sector.
Forecasting the year ahead
That’s not to say that there’s clear sailing ahead in 2024. We’ve been partnering closely with all our clients as we forecast an outlook for the remainder of the year. There’s a consensus that there’s still some volatility to overcome as we progress.
Tightness in the labor market will persist which should keep wage growth elevated. However, the pace of job gains and wage growth has fueled household consumption which, in turn, has boosted GDP in recent quarters. If consumer sentiment rebounds further and asset prices remain elevated, particularly the equity markets, consumers are likely to continue fueling growth in 2024.
The sharp increase in market interest rates has directly reduced corporate profits through increased borrowing costs. The Federal Reserve has signaled that it expects to reduce its target range for federal funds three times this year. As benchmark rates decline, borrowing costs should ease and support investment – most likely in residential real estate first as mortgage rates continue to decline from their highs last fall. For commercial real estate, investment in certain sectors may remain challenged.
Fostering the US-Israel alliance
During a recent visit to Israel, I met with many of our clients and discussed my outlook for the US economy and reinforced our ongoing commitment to help them navigate the turbulence ahead. Just like our organization and many of our US-based clients, the Israeli market has been tested through various economic cycles and has proven to be equally resilient in the face of uncertainty. And despite the uncertainties that lie ahead, we continue to build deeper relationships with our Israeli partners to help them navigate the US market by giving them access to broad capabilities, resources, and personalized expertise as they pursue their business and personal ambitions. We remain focused on supporting Israeli innovations in AI and other high-tech areas, recognizing the pivotal role these investments play in driving forward global advancements in technology.
Ira Robbins is the CEO of Valley Bank
First published: 11:15, 13.02.24
