Reinhart Week in Review by Madison Investments 1.26.2024


According to the Bureau of Economic Analysis, real GDP grew at a 3.3% annualized rate in the fourth quarter, driven in large part by a 2.8% increase in personal consumption along with solid export growth.

Our Take: Q4 GDP growth dramatically outpaced expectations. Given the strong economy, the Fed will be very careful about the timing of rate cuts and is likely to favor a slow approach.


Personal incomes rose 0.3% in December while spending increased 0.7%.

Our Take: The consumer continues to spend, buoyed by relatively strong personal balance sheets which increase borrowing capacity. The increased borrowing was necessary, as income growth did not match spending growth. For now, consumer spending continues to drive growth, making a soft landing possible. However, borrowing capacity is not unlimited, meaning increased spending will eventually need to be more in line with income growth.


The Personal Consumption Expenditure (PCE) deflator rose 0.2% in December and is up 2.6% year-over-year. Core PCE rose 0.2% and 2.9%, respectively, over the same periods.

Our Take: Inflation is on the path toward the Fed’s 2% target. Of note, the annualized Q4 core PCE actually came in at 2%, meaning that if inflation stays where it was in Q4 over the next three quarters, the Fed will have achieved its 2% goal. The inflation picture is not all roses, however. The Fed has acknowledged that a number of factors like improved supply chains and labor force growth, which are leading to lower inflation, are beyond their control. Inflation could reignite if gains in these areas reverse.


Reports came out about a $278 billion package to support the Chinese stock market following Premier Li Qiang’s order to calm the equity markets, which are down significantly from their 2021 peak. The People's Bank of China (PBOC) also announced a surprise cut in the required reserve ratio (RRR), its preferred method to add monetary stimulus.

Our Take: Chinese leaders are clearly becoming concerned about the state of the Chinese economy and stock market. While the announced measures may provide some temporary boost, the Chinese economy and capital markets are unlikely to rebound without resolution of issues around the property market, overindebtedness, investability by foreigners, and geopolitical tensions with the West.


Georgia Governor Brian Kemp released a proposed amended fiscal 2024 and fiscal 2025 budget which includes plans to use some of the state’s revenue surplus to finance capital and maintenance projects instead of issuing bonds. The proposal calls for the use of nearly $2 billion of cash from the surplus. Governor Kemp touted the plan and said that the “investment will be made without issuing a single additional dollar in general obligation debt, saving taxpayers millions in future debt service costs over the next two decades.”

Our Take: Georgia finds itself in a healthy fiscal position after years of budget surpluses and can afford to use cash in lieu of municipal issuance. The state reported $18.5 billion in cash reserves as of June 30, 2023.

“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”). MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.

Any performance data shown represents past performance. Past performance is no guarantee of future results.

Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of, or guaranteed by, any financial institution. Investment returns and principal value will fluctuate.

This website is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Although the information in this report has been obtained from sources that the firm believes to be reliable, we do not guarantee its accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitute the firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Quality refers to the bond ratings provided by the various third-party ratings agencies. Stability and predictability refer to the cash flow of individual securities and not to the market value or performance of portfolio holdings. There is no guarantee this strategy will lead to investment success.

In addition to the ongoing market risk applicable to portfolio securities, bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally, the longer a bond’s maturity, the more sensitive it is to this risk. Bonds may also be subject to call risk, which allows the issuer to retain the right to redeem the debt, fully or partially, before the scheduled maturity date. Proceeds from sales prior to maturity may be more or less than originally invested due to changes in market conditions or changes in the credit quality of the issuer.