January 2024 Market Recap
As the first month of the year ends, the broad markets closed the last trading day of the month up just 1% year to date. Markets had been optimistic through the third week of January, even reaching all new S&P 500 highs. This achievement was ahead of most analysts predictions that we would see new highs by mid-year 2024. However, the excitement began to wane during the last week. Investors have been eyeing the Federal Reserve’s stance on interest rates and were concerned by Jerome Powell’s statements on January 31. Hopes of a March interest rate cut were dashed as Powell gave his statement regarding possible cuts. “Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s to be seen,” Powell said. Markets responded accordingly by selling off, with the technology heavy index Nasdaq taking the biggest hit as it sold off over 2% for the day. The previous trading days had been marked by increased volatility as investors grew increasingly anxious about interest rates. Interest rates continue to be important because high rates affect corporate bottom lines, and bottom lines affect profits.
Unfortunately, we won’t get a reprieve in interest rates until inflation comes down to around 2%. The Federal Reserve is likely to take a more conservative stance regarding interest rate cuts after they got burned in late 2021 and 2022 when they thought high inflation would be transitory. They were surprised when it was higher and more persistent than expected. If inflation remains sticky, cutting interest rates too soon could undo much of the progress that we have made. Even better, if the Federal Reserve can achieve its ultimate goal of bringing down inflation without harming the economy (the elusive soft landing) this could even further bolster returns in 2024. So far the economy has remained resilient in the face of challenges. The job market remains strong, and our economic growth has kept us from recession so far.
In my opinion, the topics to watch will be interest rates and inflation for 2024. The sooner inflation decidedly falls, the sooner we will see interest rates begin to come down. The markets may continue to be tentative until they feel confident that interest rates will finally trend down later in the year. Until that happens, growth stocks may continue to experience heightened volatility. I am not saying to count them out, I am just saying we should pay close attention. We have investment rules for a reason. If we begin to see violations of our rules, we will respond accordingly. If you do not feel confident regarding your current portfolio rules, consider finding a fiduciary advisor who can help you establish an investment policy. If you have any questions, please give us a call. We are happy to help. Until next month we wish you a safe February.
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
