January Market Recap
The stock market is 1-for-1 in 2024.
All three major benchmarks finished moderately higher in January. Given the strong rally we experienced in the two months prior, holding on to those gains is an encouraging first step in the new year.
Technology and Communication Services were the sectors that dragged equities higher for much of last year, and that proved to be the case again in January. Communication Services, which includes Meta and Alphabet, increased 4.8% last month. Technology, which is headlined by Microsoft and Apple, gained 3.9%.
Six of the 11 equity sectors in the S&P 500 were negative last month. Real Estate (-4.8%) and Materials (-3.9%) had the worst returns.
Benchmark Returns: January 2024 | YTD 2024
|
Dow Jones
|
S&P 500
|
NASDAQ
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+1.22% | +1.22%
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+1.59% | +1.59%
|
+1.02% | +1.02%
|
|---|
If inflation was the biggest financial story of 2023, rate cuts are the early favorite to fill that role in 2024. Much of the recent momentum in stocks is due to expectations the Federal Reserve will begin cutting interest rates sooner rather than later.
As the year began, markets suggested a strong probability the first cut would happen in March. But Fed Chair Jerome Powell did his best to temper those expectations this week. On January 31, Powell stated it will not be appropriate to cut interest rates until there is “greater confidence” inflation is falling to 2%.
Stocks responded with their worst trading day since September. The S&P 500 fell 1.6% on January 31. The NASDAQ dropped 2.2%. It’s significant, however, that the pessimism didn’t last long. Stocks recaptured much of those gains one day later thanks to strong earnings reports. Still, it’s a reminder that Fed policy remains front-and-center even with inflation fading into the rearview mirror.
The S&P 500 sank lower in the first three trading days of the year, likely related to profit-taking by those who preferred not to book taxable gains prior to December 31. The selling proved short-lived, however.
On January 19, the S&P reached a new all-time high, surpassing 4,800 and its previous mark set two years ago. As of January 26, the S&P had moved higher in 12 of the last 13 weeks.
The strong momentum in asset prices has not gone unnoticed by Americans. The University of Michigan’s survey of consumer sentiment showed the largest 2-month bump since 1991. Certainly, growing conviction that the inflation war has been won is a driving force in those numbers.
Initial estimates suggest the US economy grew 3.3% (annualized) in the fourth quarter. That is considerably better than expectations of 2% growth, albeit slower than the 4.9% pace we saw during Q3.
Inflation data was mixed last month. The Fed’s preferred gauge – Personal Consumption Expenditures (PCE) – dropped more than expected and showed 2.9% inflation from a year earlier (excluding food and energy prices). The latest Consumer Price Index (CPI) increased 3.4% year-over-year.
Bond yields were up slightly in January. The 10-year US Treasury ended the month at 3.97% (up from 3.87% at year-end). It got as high as 4.2% on January 19, still a far cry from the 5% Treasury yield we saw in October. Money market yields have remained steady but are sure to come down once the Fed implements the aforementioned rate cuts.
International equities and small-caps both lagged in January. Non-US Developed Markets fell 0.5%. Emerging Markets lost 4.5%. The Russell 2000 index was down 3.9%. China, the world’s second largest economy, reported 5.2% economic growth in 2023, which was considerably better than its 3% economic growth in 2022.
West Texas Intermediate Crude reversed a lengthy trend of falling prices. Oil gained 3.4% last month and finished January just above $74 per barrel.
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
Marks Group Wealth Management performs in-house analysis on companies. Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings. The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice. Additional information is available upon request.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser. Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.
Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
