The S&P 500 (which basically tracks the stock performance of the largest 500 companies in the US) closed above 5,000 for the first time ever on Friday. From the amount of financial commentary that this number has produced, you would think we had landed on the moon AGAIN.

Jonathan Treussard returns to Economics Matters to discuss his 2024 market outlook. Jonathan starts off reviewing 2023's remarkable soft landing and surprising stats, including real GDP growth, labor productivity growth, sustained low unemployment, plunging inflation and interest rates, significant gains in stocks and other assets markets, and very low levels of risk. Jonathan then tells us what could go wrong in 2024. Will the economy return to normal or will the banks get further slammed by commercial real estate, a trade war or worse with China, inflation kicking back up, and more?

In the world of investing, when someone is regarded as a skilled investor, people inevitably end up saying things like “Jane can see around corners.” That’s doubling down on the idea of predicting the future with the extra kicker of implausibility that comes with defying the laws of physics. The angle is the angle, and you can’t bend light beams when convenient. Good luck with that.

Welcome to 2024. If the Fed is indeed on the verge of taking rates down, the era of “T-Bill and Chill” may be over. What happens when “T-Bill and Chill” is retired? There are two natural candidates for the next era:

1. “Other Thing and Chill.” Maybe something else comes along that’s as chill as 5% T-Bills. Everyone is happy and investors stay as relaxed as they’ve been.

2. “Hey, what happened to Chill?” Maybe when the vacation is over, stress surges back, and markets are dealt a bad case of the Mondays.

In today’s episode, the three of us kick around a bunch of topics. We talk about asset allocation, investor interest in commodities & TIPS, why Nic hates when people say gold is an inflation hedge, how financial incentives drive behavior, and why that’s an issue in areas like finance and residential real estate.

Financial literacy is a baseline amount of understanding around money concepts. Think of the difference between being literate (being able to read) and being illiterate (not being able to read). We’re talking about whether you can read dosage instructions on your kids’ cold medication. Without basic literacy, the world gets real dangerous real fast, for you and for those you care about the most.

Barely two weeks ago, we were talking about interest rates jumping up in an historic way during September. Not to be outdone, we’ve now had an history-making jump down over the course of 3 days last week. How meaningful was last week’s decline in yields? We study the data to find out.

September 2023 was a very unusual month in markets (October is equally unusual so far). Interest rates on government bonds jumped in an historic manner. At the risk of looking a “gift horse in the mouth,” let’s look into why this move in US Treasuries happened. It seems like a healthy intellectual exercise, especially when the horse in question is the one horse that sets the tone for all the other horse races around town.