The Forecast

The UCLA Anderson Forecast met for its December conference this past Wednesday. Basically, the outlook projected is one of slower growth, but not recession nationally. There are the obvious risks including two wars at present and where they might lead. California's outlook is much the same as seen below:

The California forecast

During the early part of this year, uncertainty about California’s 2023 economic outlook was elevated because of the uncertainty in national economic policy. Even though recession worries have faded, increased military activity abroad and a sense of greater geopolitical risk has kept uncertainty about the future high.

This uncertainty factor, combined with a slower-growing U.S. economy in 2024, suggests a slower-growing California economy. There is some indication in the employment numbers that the fourth quarter of 2023 and the early quarters of 2024 will see small but positive growth. However, the data signals are mixed. California’s labor force has declined of late, and the unemployment rate has been inching up. While there are still tailwinds in the data, they have moved from relatively strong to a very mild breeze. As such, there is less confidence in California’s outperforming the U.S. in 2024 than there was three months ago...

Full news release: https://www.anderson.ucla.edu/news-and-events/press-releases/ucla-anderson-forecast-says-despite-geopolitical-uncertainty-data-indicate-no-recession.

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From the outlook for financial markets:

Over the longer term, expect much lower returns from stocks.

Over the near term expect a sideways stock market with more than the usual volatility and modest rate cuts. The 2024 election year dynamics will not help.

Full outlook analysis: http://www.uclaforecast.com/uploads/forecasts/2023/Dec/Dec2023_uclaforecast_shulman.pdf.

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Note that the financial market outlook has two implications for UC. It means lower returns for the pension portfolio and thus continued upward pressure on contributions. And, because the state budget is heavily dependent on income tax receipts from capital gains (which won't be there if there is a "sideways" stock market, it means budget pressures on the state which will filter down to UC.