The US economy experienced a quick recovery in 2024 following the COVID-19 lockdown slump, leading to renewed optimism across the country. The Dow Jones Industrial Average reached record highs, hitting 37,903 and the Nasdaq composite also climbed to 15,605 during the same period, showing positive movement in the US equity markets.
However, it is affluent Americans who are driving the US economy this time around rather than the middle class. Affluent Americans who invested in government bonds received higher yields in 2024 which may be a factor in delaying the Fed’s rate cuts this year. With rising home prices causing challenges for middle class, affluent Americans are reaping benefits as their income increases in government bonds, commodities market and stock market.
The wealth effect has helped prevent a sharp slowdown in the US economy by boosting consumer confidence and spending. This unexpected strength is contributing to stickier inflation and has caused a shift in the Fed’s plans. Affluent Americans are driving the US economy through gains in stocks, commodities and even crypto. If they are not successful in making money in 2024 there is a risk that the US economy could suffer.
Overall, significant gains in stocks, fixed income, home prices and even crypto are providing a strong tailwind for growth of the US economy according to Torsten Slok Chief Economist at Apollo Group.
