January market recap

January market recap: Reactions & results

magnifying glass on rising and falling indicators
02.07.2024

Heading into the New Year, there was a significant disconnect between what the Federal Reserve said it expected for interest rate cuts and what was priced in markets. To close that gap in January, multiple Federal Open Market Committee members made it a point to vocalize their lack of urgency in cutting rates.

Investors finally started to believe them.

A strong report on gross domestic product late in the month dashed almost any remaining hope for a rate cut in March.

Market reaction

The outlook for a more patient Fed boosted the dollar and took most of the wind out of the global stock rally that began in November. The mega-cap heavy U.S. market managed modest gains as the Magnificent Seven continued to attract buyers, with the notable exception of Tesla, which was down almost 25% for the month.1

Outside of the biggest U.S. stocks, there was little breadth. The average issue in the S&P 500 was down, as were small cap stocks, which have proven to be more interest rate sensitive. International stocks also finished the month in the red.

Last year featured extreme concentration, where most market gains came from a very small number of companies. While we believe this trend is unsustainable and likely already overextended, it accelerated in January.

Mixed results

With all the hype around AI, earnings reports have been mixed. With about half of the S&P 500 reporting so far, earnings growth is tracking at a modest 1.6%, according to FactSet.2

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1 YCharts

2 FactSet, "Earnings Insight," February 2024.

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Craig Birk, CFP®

Contributor

Craig is the Chief Investment Officer at Empower Personal WealthTM. He oversees portfolio management and leads the Empower Personal Strategy Investment Committee, focused on translating technology improvements into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. He has managed assets for institutional and retail investors for over two decades. Prior to Empower, he was the Chief Investment Officer at Personal Capital, and he has also held a senior portfolio management role at Fisher Investments.

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