2024 Market Outlook: A Volatile Year Ahead?

Martha C. White

The American economy defied pundits’ predictions of a recession in 2023, but the outlook is considerably murkier for the new year. Some economists and market analysts believe a downturn in 2024 is likely.

We’re still feeling the effects of inflation, and there’s always this thought about a looming recession,” says jewelry industry consultant Bill Boyajian, founder and CEO of Bill Boyajian & Associates.

In anticipation of an unpredictable year, industry professionals and market experts say they are keeping close watch on a handful of factors.

Persistent inflation, higher expenses

Although inflation has fallen from its peak, it remains much higher than before the pandemic.

Inflation has been so bad,” says Kimberly Collins, founder of Kimberly Collins Colored Gems in Reno, Nev. “Discretionary income is crunched because people are paying a lot more at the gas pump, for utilities, for a gallon of milk. I think people are going to be more conservative with their purchases this year.”

Jewelers report higher expenses across the board. “It feels like everything is continuing to go up, from light bulbs to security system upgrades, inventory, everything,” says Michael Richards, vice president and chief operating officer of Underwood Jewelers in Jacksonville, Fla.

The cost to hire and retain workers also continues to climb. Peter Harts, senior manager of career services at GIA, says the tight job market means that labor costs will continue to be a hot spot. “Right now it’s a job seeker’s market,” he says. “Businesses have to actively recruit, [and] starting salaries are being increased.”

Richards agrees. “Since the beginning of COVID, it’s been darn near impossible for companies to hire people,” he says. “Everyone needs employees, it seems.”

Ruby and yellow, blue, and pink sapphire eternity bands by Kimberly Collins Colored Gems

Domestic and global politics

The 2024 presidential election is likely to be a headwind, experts say. Any uncertainty about the direction of the economy or changes to taxes and regulations that might occur when the balance of power shifts in Washington, D.C., can weigh on consumers’ decisions to purchase discretionary items like jewelry.

Election years have always been unstable years in general because consumers don’t know where things are headed,” says jewelry publicist Jen Cullen Williams.

Richards has observed that political volatility can have a chilling effect on consumer sentiment. “There’s always a lot of uncertainty in election years, and you just don’t know what’s going to happen,” he says. “I think people have fears sometimes about the direction of our political parties, and that can make people hold on to their money and not spend it on luxury products.”

International events are also shaping the economic outlook. Russia’s 2022 invasion of Ukraine has already had an impact on everything from fuel prices to the diamond supply chain. Some fear that any escalation of the Russia–Ukraine conflict could destabilize the global economy and make consumers reluctant to spend.

“I still worry a lot about the war with Russia and Ukraine,” Boyajian says.

Likewise, the Israel–Hamas hostilities feed concerns that any spillover into a larger regional conflict could have a wide-ranging economic impact.

Even absent the threat of war, global economic conditions bear monitoring. Charles Schwab analysts note that the post-pandemic recovery of the Chinese market for luxury goods has been slower than anticipated, and ongoing challenges in that country’s real estate sector are also depressing consumer demand.

9.05 cts. t.w. round brilliant Namibian Kipikee diamond studs in 14k white gold by Underwood Jewelers

Consumer spending

Although American consumers have proved remarkably resilient through the pandemic and its aftermath, there are indications their spending power might soon be exhausted.

“All the major luxury conglomerates reported in the last quarter that sales in the U.S. had started to decline, and that was the canary in the coal mine as to what could potentially happen,” says Pamela Danziger, founder of Unity Marketing in Stevens, Pa., a consultancy that focuses on the luxury market.

In an investor conference call in July, the chief financial officer of luxury behemoth LVMH said that aspirational consumers—that is, people who purchase lower-priced or entry-level luxury goods—have pulled back sharply on spending.

More broadly, recent data released by the U.S. Commerce Department found that consumer spending slowed significantly in the second quarter of 2023, and analysts from Moody’s Investors Service are predicting that people will pull back on discretionary spending in the months ahead.

“We’re really focusing on consumer spending and especially discretionary spending, because we think that’s going to be the factor that sets the stage for what purchasing is going to be like,” says Jim Sanderson, managing director and equity research analyst at Cleveland-based Northcoast Research.

While inflation threatens to curtail economic activity, policymakers’ strategies for fighting it by raising interest rates also could hurt the economy. Higher borrowing costs weigh on both households and businesses, constraining spending.

With higher interest rates, experts say the most significant impact for the jewelry industry is the effect on consumers’ ability and willingness to finance jewelry purchases. “As interest rates rise, it’s going to be tougher for the consumer,” Sanderson says, noting that credit card delinquency rates have been climbing and have already surpassed pre-pandemic levels.

There are also implications for businesses that need to borrow money. “For most small businesses, it’s going to be harder and harder to finance expansions [and] manage inventory,” Sanderson says. “It’s another cost of doing business that’s going to be a little bit tougher. We’re trying to figure out what the new normal is, and that’s the big unknown.”

The limited-edition brushed titanium and chalcedony Defy Extreme Glacier from LVMH brand Zenith

Top: Watermelon tourmaline dangle earrings by Kimberly Collins Colored Gems

Source JCK Online