January market recap
January market recap: Reactions & results
January market recap: Reactions & results
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 Birk is the Chief Investment Officer for Empower Personal Wealth. A CERTIFIED FINANCIAL PLANNER™ professional, he is responsible for Empower’s retail investment portfolio, providing strategic and executive direction to drive the optimal management of client assets.
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