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To find a Certified Kingdom Advisor in your area, visit faithfi.com and click Find a CKA. Only God knows the future, but some folks are pretty good at making educated guesses. Hi, I'm Rob West. One of those prognosticators is our friend Bob Dahl, and he's got a whole list of things he expects to happen in 2024. We'll go over them today, and then it's on to your calls at 800-525-7000.
That's 800-525-7000. This is Faith and Finance, biblical wisdom for your financial decisions. Well this is always a fun time for us when we can have Bob Dahl on the program for his annual predictions. Bob is the Chief Investment Officer at Crossmark Global Investments, a faith-based advisory firm that manages over $5 billion in assets, also an underwriter of this program. And Bob, great to have you with us today.
My privilege as always, Rob. Bob, normally we have you join us each week with the market update, kind of reflecting on the past week, looking at the week ahead, but we're going to zoom out a bit and focus in on your sought-after annual 10 predictions for the coming year. But before we dive into those for 2024, why don't we look back first, and perhaps you can just reflect on last year's predictions, how that went, and what your assessment is. Well in baseball we did just fine. We batted.500. 5 out of 10 we got right, Rob, but that's well below our 72% long-term number.
It was a tough year. You recall we entered the year, not just us, but just about everybody, anticipating a recession in 2023, and that just didn't happen. In fact, the economy got stronger, the labor market continued to flourish, and inflation with the Fed's help continued to fall.
We didn't get to the central bank targets of 2% inflation, but we made some good headway. And so we would argue at the end of 23, the risks are now more symmetric. That is, the risk of inflation is still there, it remains sticky and above target.
But on the other hand, the risk of weaker economic activity exists also. Unusual for late and in expansion, 2023 saw P-E ratios, valuation levels, move up. So it wasn't so much earnings that carried the day, but higher valuation levels, which took those so-called magnificent seven to very high prices. In fact, the average stock at the end of October, Rob, was still down thanks to the November-December rally that changed, but boy, that average stock lagged those magnificent seven and therefore the benchmarks very significantly. Yeah, and clearly those valuations are going to weigh on us as we think about what might play out in 2024. We'll get to that in a moment. But talk about the narrowness, Bob, of the average stock and whether we truly did rectify that in the last couple of months of the year, or was it really still highly concentrated toward a more narrow range of stocks?
Rob, it was still very concentrated. Despite the catch up in those last couple of months, the average stock still trailed the averages by over 10 percent, a thousand basis points. So we've got a ways to go if we're going to close that gap.
Yeah. So, Rob, the reason why we didn't get that recession that just about everybody expected, do you think it's just because of the amount of cash in the system on the heels of COVID? Are there other reasons? Is it just a stronger economy and job market than we anticipated? What do you make of it? Yes, all of the above to your first reason, yes, there was a lot of cash, more than many of us thought, left over from COVID. Either the government mailed you a check or you didn't spend money, and that built up cash balances that helped fuel the economy during 2023.
Yeah. And what about the labor market? Obviously, we saw strong numbers even recently in the latest jobs report. So it seems like that piece of the economy is still working. It sure is. And until that weakens somewhat, it's really hard to argue for significant weakness in the economy. And it is a bit of a bugaboo for the Fed because if job growth remains strong and the economy is still okay, wage rates are likely to be stubborn as they have been in recent reports, and that prevents the Fed from getting debt to that elusive 2% target. Yeah.
All right. Well, we're going to turn the corner and look forward after the break. We'll talk about whether we'll finally have that recession in 2024.
A lot of folks think we'll escape it entirely. We'll get Bob's take on that. Plus, we'll dive into those 10 predictions. The theme, Goldilocks remains a fairytale. Bob will explain that and get into some of the specifics on his 10 predictions for 2024. Bob Doll with us today. He's chief investment officer at Crossmark Global Investments, a faith-based advisory firm.
And we're back with much more just around the corner. Stick around. Are you looking for a financial professional who aligns with your biblical values? Certified Kingdom advisors are trusted financial, legal, or accounting professionals who have completed a rigorous certification program to ensure they provide biblically wise financial advice as part of their practice.
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Go to faithfi.com and click the word app to get started. Thanks for joining us today on Faith in Finance. I'm Rob West.
With me, my good friend Bob Doll. He's chief investment officer at Crossmark Global Investments, a faith-based advisory firm. You can learn more at crossmarkglobal.com. He's also a frequent contributor on Fox Business and CNBC, and his annual 10 predictions are sought after on Wall Street. A lot of folks wondering what Bob is predicting for the year ahead. We're unpacking those predictions in this interview today. Bob, just before the break we were talking about last year, let's start to look ahead. As you mentioned, a lot of economists thinking that we are finally going to get that technical recession in 2024. Others think that we'll miss it entirely.
Where do you come down? I think we're going to have a recession. Mild most likely, Rob, but you know, I marvel at how the beginning of last year virtually everybody said we're going to have a recession. And now, the beginning of the new year, virtually everybody's saying, soft landing, don't worry about it. So I'm not sure it's that simple.
I still think we have residual issues from Fed tightening and inversion of the yield curve among others that will cause us to sag for our economy in 2024. All right. Very good. Well, it's something we'll, of course, keep an eye on. All right.
Let's dive into the 10 predictions for 2024. Let's start with the theme, Bob, Goldilocks remains a fairy tale. Explain that. Yeah.
Goldilocks, of course, it's a perfect environment, not too hot, not too cold. I don't think you can have it both ways. That is to say, if we have a soft landing and the inflation rate continues to fall, we're not going to get double-digit earnings growth, which the consensus is calling for, and therefore the earnings disappointments will hold stocks back. Conversely, if we have double-digit earnings growth, it probably means the economy is reasonably strong and maybe inflation doesn't fall like we think.
I don't think you can have it both ways. Yeah. Very good.
All right, Bob. The first prediction is that the U.S. economy experiences a mild recession. You just mentioned that. You also say in this prediction, the unemployment rate rises above four and a half percent. Where are we today and what effects will we feel from that if that plays out? We're at 3.7 percent currently. In fact, we've now gone 25 months, the longest period in over 50 years, with the unemployment rate below 4 percent. So 3.7 to above 4.5, that's not a lot, but it would cause a mild recession.
All right. Number two has to do with inflation. What's the second prediction? We've not talked about inflation until the last couple of years, because the prior decade inflation was between zero and two. We think we're in an environment where inflation is going to be an annual topic, because the inflation feeling of the last decade becomes the inflation floor of this decade. Hmm. Interesting.
All right. And does that continue then, you think, for decades? I mean, where do you think inflation is ultimately headed? So I think in the United States, given all kinds of structural issues, a more normal long-term structural inflation rate is closer to three than it is two, whereas last decade, the answer to that question was closer to two.
We had a wonderful period where a lot of things lined up, not so sure that's going to be the case going forward. And that leads us to our third prediction, and it has to do with the Fed. So the question is, Bob, will the Fed just get comfortable with that higher, perhaps closer to 3 percent inflation rate? And what does that mean for rate cuts in 2024? I think they'll have to get more comfortable with that.
Now, not everybody agrees, and they'll still try to get to two. The expectation by the Fed fund futures curve, in other words, investors, is the Fed's going to cut rates six times in calendar 2024. With the recent strength of the employment numbers, I don't think they'll be able to get started in March, as many people are thinking.
All right. Let's jump ahead a few predictions to stocks. Where will stocks end the year? Obviously, we're coming off of an all-time high right at the end of 2023.
Where do we go from here? Yeah, I think that there's some residual strength from the huge momentum of November, December. So we could go higher for a period, but this Goldilocks not happening tells me that we probably have a sag or a fade in the stock market. And I think there's a better chance that stocks have a minus sign in front of them this year than a plus sign.
Means you're going to have to work hard to make some money. Won't be impossible, but more difficult. Yeah. And would you apply that minus sign, just in your estimation, to both the S&P 500 and the tech-heavy NASDAQ?
Yes, I would. I think the valuation rise that we saw in both of those is going to be a bit of a fade this year. We may have some catch up in some of the laggard areas, some of the defensive stocks, smaller cap stocks. We've seen that in the last few weeks. I think there's more of that to come, Rob.
Yeah. Let's dive into that just a bit deeper. What do you think are the sectors of the economy and therefore stocks that will outperform this year? Yeah, we always have a prediction that says these sectors over those, and this year that prediction is energy, financial, and consumer staple sectors outperform utilities, healthcare, and real estate.
I'd highlight energy and financials as extraordinarily cheap, and if we have an okay economy, both those sectors I think we'll see not just some earnings growth, but also some valuation improvement. Interesting. Rob, obviously a lot going on geopolitically beyond our borders.
Does that continue, and what impact does that have on the markets? Yeah, boy, we could spend hours on this one, Rob. The list is long already.
You know it. I think we will have more hot spots in geopolitical and just domestic political crosscurrents. Let's hope that we have a little impact on the markets. Take the Middle East war, for example. If it expands and the Straits of Hormuz and the Red Sea become a problem for oil prices, well then that will impact markets, but so far so good.
We have to pray to the good Lord that we stay clear of those sorts of things. That's for sure. Bob, you always have a prediction related to the makeup of the political landscape here domestically. Obviously, it's an election year.
What do you make of that? Yeah, our somewhat provocative prediction is that all three elections switch parties. That is to say, the White House moves from Democrat to Republican, the Senate moves from Democratic to Republican, and the House moves from Republican to Democrat. All three parties switch, and this would not be unprecedented. For the last ten elections, in nine of them, we voters booted out the incumbents, as we're always looking for something better than what we've got. And that would mean we're going to see the stalemates continue, just in terms of getting things done, I guess, huh? Yes, and the polarization just to increase.
Wouldn't it be great if we really had someone who could unify and be representative and govern for all the people, not just a political party? Bob, just 45 seconds left. Let's finish with faith-based investing. Where do you see that headed in the new year? The good news is, for seven years in a row, faith-based investing has increased its market share of overall assets under management. We think this will be year eight, as more and more people of faith are spending time to line up their portfolios and their faith so they're one in the same. We think it's a great trend and thrilled to be part of it. Wow, I love it, Bob. I hope that continues to play out.
Really exciting what's happening in the faith-based investing sector. Well, Bob, great work, my friend. We appreciate you sharing your predictions with us. Have a great year. Bye, low, sell high.
That's Bob Dahl. You can download the complete list of his 10 predictions at crossmarkglobal.com. That's crossmarkglobal.com. Back with your questions just around the corner, 800-525-7000, stick around. We are grateful for support from Soundmind Investing and the Faith and Finance Program. For more than 30 years, they've been helping Christians reach their financial goals with step-by-step guidance for investors at every stage, from those just getting started to those getting ready for retirement. Through scriptural principles and practical suggestions, SMI offers financial wisdom for living well.
More information, including the short video webinar on profit and peace of mind, no matter what's happening in the market, is available at soundmindinvesting.org. My grocery bill went up 11% this year. Gas, utilities, rent, all went up, but my paycheck, the same. I also pay for my own healthcare, a huge expense. A friend recommended Christian Healthcare Ministries as an option to insurance and CHM helps pay for medical needs while allowing some breathing room in my budget. Open enrollment is here, so make the switch today with potential cost savings up to 40%. Christian Healthcare Ministries at chministries.org slash faithbuy. Welcome back to Faith and Finance. I'm your host, Rob West.
The number to call is 800-525-7000. I'm looking forward to hearing from you as we take your calls and questions from across the country. In fact, let's head out to Elgin, Illinois. Hi Terry, go right ahead.
Hi Rob, thanks so much and thanks again for your ministry. It's wonderful. Well, thank you.
I appreciate that. Yeah. Rob, I bought an I-Bond, a $10,000 I-Bond back in October of 2022. Rates were high on those and so I got that. I'm just wondering, is that something I should keep for a few years and keep investing into, add more to that, or is that something that I should think about getting out of?
Yeah. So, you got probably that 6.89% rate for the first six months and then you're at 4.3 right now. So, let's say you got 11.19, you know, would be between the two, obviously, and then if we average that, you know, you're running around 5.6, you know, if you blend the two rates. Now, if you pull it out after a year, you're going to give up about, you know, three months worth as a penalty, so about a half a point and so, you know, that's about 1.4%. So let's say you were running 5.5 and we take 1.4 off of that, so you still got about 4.1 even after the penalty, a pretty good rate of return. You know, for those folks who got in, you know, the six months prior to you, you know, they got a six months at 9.6.
That was when it was really attractive. But the big question is, where is it going from here? And I think just given the fact, Terry, that, you know, the Federal Reserve is so focused on getting inflation under control and as inflation comes down, those I bonds, the I standing for inflation, are going to come down with it. So I think moving forward, you're just, you're not going to see really an attractive rate here. This was, you know, I had always said this is probably only money you'd want to put into this was money that had a one year, one to three year time horizon on it because anything more than three years, I think you'd do better in a stock and bond portfolio and anything less than a year, you'd be better in high yield savings because you have to keep it in for a year. But I think what you've, you know, gotten in this I bond is about all you're going to get.
I think the rate will continue to fall. And so I think this is a good time to pull it out, pay that three month penalty and look for another place to deploy it. And the good news is, there are places I mean, you could take that 10,000 and put it in a one year CD right now at, you know, 5.6%.
So I think there are places to go and given the reasons I just shared, I'd probably think about getting out. I appreciate that because that's, I've heard you speak on the I bonds prior and I just was starting to get that itchy feeling like maybe I should start thinking about moving this somewhere else. So I greatly appreciate your help on this, Rob. All right, Terry, thanks for calling today and thanks for your kind remarks about the program. I appreciate it.
Let's head to Charleston, South Carolina. Renee, go ahead. Hey, I was telling the nice lady that I just started listening to you a week ago. I've been telling my whole family, I'm a truck driver, so I'm in the truck for 10 to 12 hours every day and I love your work.
Oh, thank you, Renee. That's very kind of you. Are you on the road right now? I am. All right.
What are you hauling today? Well, I mean, I work at the port, so I pulled this port stuff out to the rail warehouses, that kind of stuff. Okay, great. Well, hey, I'm so glad you found us and how can I help you? Okay.
So my husband passed away about five years ago. All I have is a mobile home, but it's on a property where you rent the lot and that's about 650 a month and I feel like I'm just wasting my money. I didn't know if you thought it would be a good idea to maybe sell the mobile home and invest that money into a piece of land somewhere else because I can pretty much live anywhere, you know?
Yeah. And so what would you buy instead? Would you buy raw land or something else? Just maybe another mobile home on a piece of land or a house.
Okay. Yeah. I mean, I like the idea of you buying something. I mean, that would obviously give you an asset that could appreciate over time. You know, in terms of the property you have right now, you pay a lot rent, but you own the mobile home on top of it, correct? Yes, I straight up own the home, but because it's on their property, you know, they have a property fee, which is like 650 a month. Yeah.
Okay. And do you have the assets, Renee, where you'd be able to buy a piece of property? My credit, as far as my credit, is not good because of the past and medical bills and that type of thing. So I know that if I did that, the interest rate would probably be really bad, you know? Yeah. Well, the rates are already high right now. If you've got poor credit from some things that happened in the past, it'd be even higher.
So I think from that standpoint, you might be better off just kind of waiting this one out until maybe you improve your credit a bit and we see interest rates come down before you'd, you know, before it'd be a good idea to take on a mortgage for a piece of property. Yeah. That's what I was feeling in my gut, so I wanted some confirmation and you did it. You gave it to me. All right.
Well, hey, we did it together. Listen, I appreciate you calling today. Thanks for being so sweet about the program and you call back anytime, Renee, okay? All right. Thank you. God bless you. All right. And you too. Uh, that's great.
Uh, to Elgin, Illinois. Hey, Len. How are you, sir? I am doing well.
Thank you so much. My wife and I each have an IRA, regular IRAs, some $200,000 each, and we've been told by people in 2026 that income tax rates may well change and we're just in the 12% bracket now and we think our income is actually going to increase. We're both retired, but due to waiting for social security until 70, our income is going to increase considerably. So we're thinking about converting our regular IRAs into Roths and paying that tax.
Yeah. I think you're headed in the right direction here. You know, many of the provisions in the 2017 tax cuts and jobs act that president Trump put in place are scheduled to expire at the end of 25, which is what you're talking about here. Um, and so I think given that, given your low bracket right now, the fact that you said your income might be going up and rates going up with it, I think that makes some sense. Perhaps what I would consider is connecting with a CPA, Len, just to work on the appropriate schedule for how you might do that. Cause if you have, you know, let's say you did it all in one year and you all had between the two IRAs, you had 400,000 in income, you were recognizing clearly you'd be in a much higher bracket than, than 12%.
So you just want to work with your CPA to say, you know, what is the appropriate schedule between now and 2025 to convert at least a portion of this money without, you know, unnecessarily pushing it up into a higher bracket or at least, you know, too high of a bracket. Does that make sense? Yes. Okay. Thank you very much. All right, Len. Thanks for your call today. We appreciate it. We hope you'll make plans to join us again next time for another edition of Faith and Finance. Faith and Finance is provided by Faith Buy and listeners like you.
