The US economy experienced a rapid recovery in 2024, following the slump caused by the COVID-19 lockdown. This led to a renewed sense of optimism across the country, as indicated by the Dow Jones Industrial Average reaching record highs of 37,903 and the Nasdaq composite climbing to 15,605. 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 delaying the Fed’s rate cuts this year. With rising home values causing challenges for the middle class, affluent Americans are reaping the benefits of their investments in government bonds, commodities markets and stocks. The wealth effect has helped prevent a sharp slowdown in the US economy by boosting consumer confidence and spending through rising home and stock values.
If affluent Americans 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 Apollo Group.
