Navigating the financial landscape in the new year

What do business leaders and consumers need to know about the economy as we head into the new year?

In the 26th episode of our Sharing Knowledge Series, our guests look ahead to help business owners and consumers navigate the challenges and opportunities we’re likely to experience in 2024. Host Kevin Vonderau sits down with Mike Toth and Brian Toma to discuss what factors they’re watching to gauge the state of the economy in the new year. Mike is the Chairman & CEO of Westfield Bank.

Brian is a managing partner and registered investment advisor at Freeman Heyne Toma Financial Advisors.

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If the last year taught us anything in the financial world, it’s that you can’t predict with certainty what’s around the corner. Fortunately, the fears of a recession (two consecutive quarters of decline in GDP growth) in 2023 haven’t come to bear, but that doesn’t mean business owners and consumers haven’t faced challenges.

This year we saw the failure of several large banks, prompting concern about what would come next. Interest rates have remained at higher-than-normal levels, slowing consumer spending, and limiting economic investments. Geopolitical turmoil at home and abroad has created uncertainty in the markets, and the 2024 U.S. presidential election cycle is still ahead of us.

So, what do business owners and consumers need to know heading into the new year? To make sense of it all, here’s what Mike and Brian will be watching in 2024:

Consumer sentiment

For better or for worse, consumer feelings (both real and perceived) significantly shape our economy. Each month, the University of Michigan conducts a survey to gauge consumer sentiment, known as the Consumer Sentiment Index. November 2023 marked four straight months of declining consumer confidence, according to the University of Michigan survey, citing concerns over ongoing inflation and the conflicts in both Ukraine and the Middle East. Given the importance of consumer feelings, Brian recommends watching this monthly index.

The 2024 election

Political watchers typically consider odd-numbered years to be quiet, “off-years,” given no federal elections occur. But with a bitterly divided federal government in Washington, there’s been no shortage of political controversy in 2023, including Congressional leadership changes and government spending standoffs. And with the 2024 presidential election less than a year away, we can only expect the political environment to heat up in the coming months. Why is this important for business owners? As Brian points out, election years and the resulting partisan makeup of Congress have a significant impact on the markets, and history indicates that gridlock is actually a good thing for stocks.

Interest rates

While the Federal Reserve paused its rate hikes towards the end of 2023, we’re heading into the new year with rates as high as they’ve been in over two decades. As inflation persists in the economy, business owners and consumers are learning to adjust to this new normal. Even if the central bank moves to cut rates in the near future, Brian fears it will be too little, too late. “The Fed was late to raise rates, and they might be late to cut rates too,” he adds. The EconomyNow app from the Atlanta Fed is an easy tool for staying up to date on the latest economic data.

Community banks

One of the biggest stories of the last year was the failure of several top banks, including Silicon Valley Bank, First Republic Bank, and others. While this understandably led to fear and uncertainty among business owners and consumers, Mike made the case following these failures that there is a renewed importance of community banks. Fear, perception, and lack of investment diversification were the main contributing factors to these large bank failures - something many community banks stand in clear contrast to. Not only are community banks stable and resilient, but we also offer solutions to safeguard and fully FDIC insure deposits well beyond $250,000.

If you take away one lesson from the discussion with Mike and Brian, it’s that business owners ought to be thoughtful in 2024. Nobody has a crystal ball for what the economy has in store for us, but by closely watching these factors and economic indicators, you can position your business for success and growth. As always, surrounding yourself with a “dream team” of professionals - including a trusted banker, financial advisor, CPA, and lawyer - who have your best interest in mind can make all the difference when economic challenges inevitably arise. 

Westfield Bank remains committed to providing you with expertise and partnership needed for longevity. Amid times of economic confusion and volatility we are your business’s trusted financial partner.