The World Bank just slashed its forecast for U.S. economic growth for 2024.
Real gross domestic product (GDP) in the country is now projected to grow by 0.8% in 2024, according to the international lending institution’s latest Global Economic Prospects report. Previously, its forecast was 1.6%.
“In the United States, growth is expected to weaken significantly through 2023 and early 2024, mainly as a result of the lagged effects of the sharp rise in policy rates over the past year and a half aimed at bringing down the highest inflation rates since the early 1980s,” the report stated.
The World Bank noted that while consumption has been resilient in America, it is “expected to slow down substantially.” In particular, higher borrowing costs and tighter financial conditions could impact household spending. At the same time, Americans will run out of savings that they accumulated during the pandemic.
The outlook is concerning. More than two-thirds of U.S. GDP is made up of personal consumption. If consumers don’t spend, it doesn’t bode well for the economy.
“After growing 1.1% in 2023, the U.S. economy is likely to remain weak in 2024,” the World Bank predicts.
With that in mind, take a look at a few investment ideas suited for a slow-growth economy.
Don't miss:
- Bezos-Backed Startup Lets You Become A Landlord With $100
- Elon Musk Is Bullish On Austin. Here's How To Invest In The City's Growth Before He Floods It With New Tech Workers
Recession-Resistant Dividend Stocks
Sluggish economic growth could pose challenges for stock market investors. If companies post reduced revenue and profit growth, it could lead to lower valuations.
But you don’t necessarily need a rallying market to make money from stocks. You can also collect dividends.
With the right dividend stocks, investors can bypass the stress and uncertainty associated with attempting to time the market while benefiting from a steady stream of passive income.
Business magnate John D. Rockefeller once said, “Do you know the only thing that gives me pleasure? It's to see my dividends coming in.”
But not all dividend stocks are the same. In today’s economic environment, you’ll want to pay attention to companies that have the ability to return cash to investors through thick and thin.
For instance, retail behemoth Walmart Inc. has increased its cash dividend every year since declaring its first annual dividend in March 1974. Global beverage titan The Coca-Cola Co. announced its 61st consecutive annual dividend hike in February. Meanwhile, consumer staples giant Procter & Gamble Co. has raised its payout to shareholders for 67 years straight.
Past performance is no guarantee of future results, but because these companies have demonstrated the ability to pay increasing dividends even during recessions, they should be well-equipped to navigate a slow-growing economy.
High-Yield Savings Accounts
When the U.S. Federal Reserve kept its benchmark interest rates near zero, most savings accounts paid next to nothing.
Then inflation got out of control, and the Federal Reserve had to start tightening. In 2022, the U.S. central bank announced seven rate hikes.
Interest rate increases have continued in 2023, and the benchmark rate is the highest it’s been since 2007.
While higher interest rates have sent shockwaves across the economy — they are a key reason behind the World Bank’s slow growth projection — they also mean that people can finally earn some return on their savings.
These days, there are plenty of high-yield savings accounts to choose from. And you don’t even need to visit a brick-and-mortar bank to find the ones that pay higher interest rates and charge no account fees.
Residential Real Estate
This one might sound counterintuitive. A high-interest rate environment also leads to high mortgage rates, so shouldn’t that impact the housing market negatively?
It’s true that real estate has taken a hit.
Billionaire investor Stanley Druckenmiller recently said that housing “has obviously gone down dramatically given the 500 basis-point increase in interest rates.”
But this is not doom and gloom, as he noted that there’s now a “structural shortage in single-family homes.”
“So if things got bad enough, I could actually see housing — which is about the last thing you would think of intuitively — could be a big beneficiary on the way out,” Druckenmiller said.
The reality is, no matter how slow the U.S. economy grows, people will always need a place to live. Meanwhile, elevated home prices and high mortgage rates mean owning a home is less feasible. And when people can’t afford to buy a home, renting becomes the only option. This creates a stable rental income stream for landlords.
The best part? It’s easy for retail investors to invest in housing — and you don’t actually need to buy a house to do it. Publicly traded real estate investment trusts own income-producing properties and pay dividends to shareholders. And if you don’t like the stock market’s volatility, there are options to invest directly in rental properties with as little as $100 through the private market.
Read next:
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
