As we close out 2023 it’s useful to reflect on the things we got right and the things we got wrong. I was wrong about the US economy.

On July 5, 2022, the yield curve between the two-year and ten-year Treasury notes inverted and I was certain the US economy would slip into recession. Yield curves become inverted then the interest rate for short-term loans becomes higher than the interest rate for long-term loans. Typically, an inverted yield curve is followed by recession, but this time appears to be different.

There are no signs the economy is headed to recession, or even slowing down. In fact as recently pointed out in a WSJ Article, “A year ago, everyone from the strategists at Wall Street banks to rap artist Cardi B was calling for a recession. Instead, inflation continued falling, consumers kept spending and the unemployment rate fell to 3.4%, the lowest level since 1969.”

So, what should we expect for 2024? Clearly, I have no idea!

My best guess, inflation...

via Giphy

We may be getting close to “the end” of the Federal Reserve’s (“Fed”) interest rate hiking cycle. This week, the Fed increased the Funds Rate 75-basis points (a basis point equals 1/100th of 1%, or 0.01%). The Fed has increased rates 3.00% since March of this year from a range of 0.00% to 0.25% to 3.0% to 3.25%. But when will the Fed stop raising rates or reach the so called “Terminal Rate”. There’s been quite a bit of talk about the “Terminal Rate”, but what exactly is it and why should you care.

According to Market Watch, the Terminal Rate is “the peak spot where the benchmark interest rate — the federal funds rate — will come to rest before the central bank begins trimming it back.”  The key questions going forward are 1) how quickly Fed will get to there, and 2) how long they will stay there.

Based on the Fed’s Summary of Economic Projections, the Fed “expects”...