The US economy saw a quick recovery in 2024 following the COVID-19 lockdown slump, leading to a renewed sense of 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 playing a key role in 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 the rising value of homes causing challenges for the middle class, affluent Americans are reaping the benefits. Their income is increasing in government bonds, commodities market, and the stock market in the US economy.
The wealth effect, where rising home and stock values boost consumer confidence and spending, has helped prevent a sharp slowdown in the US economy. This unexpected strength, contributing to stickier inflation, has caused a shift in the Fed’s plans.
Affluent Americans are driving the US economy through gains in stocks, commodities, and the US dollar. 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 the growth of the US economy, according to Torsten Slok, Chief Economist at the Apollo Group.