The headline at the end of 2023 summarized the prior year outlooks: “Market Forecasts Missed Mark in 2023.” (WSJ December 31, 2023)
Most observers in 2023 thought a recession was inevitable. The Fed’s rapid rise in rates to counter inflations was intended to slow consumer demand. That reliable indicator, an inverted yield curve, had indicated negative growth was inevitable for almost six months entering the year. The economy would slow, unemployment rise and the stock market falter as a result.
Yet two of the three major market indices hit all-time highs and the S&P 500 fell just basis points short of its peak. The economy recorded a higher than normal average GDP growth. The consumer is still spending.
This macro-forecast miss should be a cautionary note as we enter 2024. Future forecasts, no matter the model used, are not facts. They are guesses often based on assumptions reflecting the users’ biases or their institution’s role in the economy.
What is Money for?
To justify an investment decision today by forecasting a hypothetical future can lead to poor outcomes. A current example is what will be the role of major head office complexes in an era of hybrid or remote work forces? Or, what is the value of assets acquired in a low interest rate environment versus the rate reset now occurring in the economy?
For credit unions, the preliminary numbers indicate that 2023will record the lowest share growth in decades. This balance sheet slowdown will influence many decisions about how and where to invest in the coming year.
Those investment decisions will reflect the values, not just priorities, of each credit union’s leadership team. Will the institution spend to buy growth from external sources? Will it invest in enhanced delivery capacity? Staff skills? Member education and well-being?
Each credit union has a different context and history in making this fundamental decision about how they will spend to enhance their role in the economy. As in the case of individual choices, that spend will reflect how leadership understands the institution’s purpose.
The slow growth in 2023 may motivate us to find something new to get back on a normal expansion. But it may be just as wise to identify what got the credit union to this point. Are those values still the ones to guide investment priorities for this year? That is, “don’t let be forgot the “auld acquaintance” of who you are and where you come from.”