Expect Volatility in 2024

There was volatility aplenty in 2023. In my judgment, financial markets will be even more volatile in 2024, resulting in a more turbulent than typical numismatic market.

Numismatic items are not part of life’s necessities. You cannot eat them, drive them or live in them. Numismatic purchases are discretionary, meaning that funds will not be available for them until the costs of food, clothing, shelter, medical care and transportation are covered. When economic times are tough, there are likely to be more collector pieces liquidated to help pay for life’s essentials.

Many people were forecasting that the U.S. economy would be in a recession in 2023. Top government and Fed officials are claiming that did not happen. However, last week the latest monthly Index of Leading Indicators report showed that it fell for the 20th consecutive month. This index is a major signal of a coming or existing recession. The last time that this index had fallen this constantly was during the Great Recession, circa 2007-2009. Even though the politicians are trying to change the definition of recession, there is a likelihood that the U.S. has been in one for a year or so.

From where we are now to what we will experience in 2024, look for economic forecasts to be all over the map. With the forecasts so wide ranging, that is the first indicator that this coming year may be quite volatile.

U.S. government spending for military actions in Ukraine and the Middle East are just one area of political and economic uncertainty next year.

The U.S. residential home market is in a slump, as is the commercial real estate market. There is nearly $900 billion of commercial real estate debt that comes due in 2024. If refinanced, almost all of it would be renewed at far higher interest rates. The owners of this commercial real estate would have the option to inject more funds into the property, to refinance at higher interest rates, or to default and walk away from the properties (as has already been happening to commercial real estate in downtown San Francisco). A survey of nearly 5,000 U.S. banks found that about 1/6 of them have outstanding commercial real estate loans exceeding 300 percent of their total capital reserves and construction loans of more than 100 percent of their capital. These debts have higher default rates than other forms.

Further, the default rates on vehicle loans and credit card debt are now already higher than pre-pandemic levels.

Corporations facing maturity of their debts are also facing higher interest rates if they choose to renew (and also if the banks are willing to extend the credit as they are tightening their lending standards). If, instead, they scale back operations to minimize paying higher interest rates, that will hurt the number of job-holders.

As for the job market in 2023, the greatest number of new jobs came from expansion in government employment. There was also a record number of part-time jobs as people were forced to take second jobs to help meet living expenses. Full-time bread-winning jobs in the private sector (outside of health care) were relatively stagnant in 2023; don’t expect better in 2024.

So, in 2024 there could be a surge of people selling their numismatic holdings to help pay living expenses. But, there could also be a surge of buying interest, especially for gold and silver, as the purchasing power of the U.S. dollar continues to plummet. When you mix all this uncertainty together, 2024 could prove to be an especially volatile year for the economy and for numismatics.

Answer to the Previous Trivia Question

Last week, I asked: Whose image appears on the greatest number of coins struck?

Just counting the cents, American President Abraham Lincoln has been on the obverse of about 570 billion coins, about 70 for every single resident on the planet.

This Week’s Trivia Question

Who was born in Virginia, was president of a country other than the United States of America and appears on a gold coin? Come back next week for the answer.

Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award, 2012 Harry Forman National Dealer of the Year Award, and 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2020), the Professional Numismatists Guild, the Industry Council for Tangible Assets, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).