Dry January is over and here are our four takeaways for the month

1st February 2024

Where did January go? No doubt for some it felt like there were 62 days last month, but away we go again…

Anyway, no matter how many days it had, or felt like it had, we’re through it now and it was a pretty mixed one across markets.

  1. US equities continued their ascent, ably supported by European equities where we have seen some stellar results from some of the European heavyweight companies in this earnings season.
  2. We had the FOMC (Federal Open Market Committee) meeting this week where, very much as expected, we saw them continue to hold on interest rates. Some marginally more hawkish commentary than expected came out of the Fed, but they are still pretty balanced in the main with the focus being that they need to make sure the inflation dragon is slayed before they can consider interest rate cuts.

So far, so sensible.

It still feels like the consensus remains on the ‘soft landing’ narrative and the Fed appear to perhaps be feeling increasingly inclined towards that too given acknowledgement that risks to achieving employment and inflation goals are moving into better balance. Expectations for Q1 rate cuts could be overdone and nothing about this statement, or any data currently coming out of the US, seem to change views on this.

  1. Equity market returns oscillated to a degree over the course of the month with a weaker first half and a recovery in the second half. As such it has been a bit of a mixed bag, but within a pretty tight range.
  2. The first part of January was a little weaker for equities, perhaps a little profit taking after a strong Q4 for risk assets, but then staged a recovery (US and Europe in the main, with the UK a laggard) through to the end of the month. A similar story for government bonds too, as the US 10 year moved higher though most of the month, but then fell almost right back to where we began the year in the last week of January. The UK 10 year also saw a similar pattern, but not quite the same degree of recovery in that latter part of January as we saw in the US.

So for now it’s steady as we go…all eyes remain on the broader theme for 2024: company earnings becoming a more important driver of stock prices and not just relying on a handful of tech giants that are now priced for perfection.

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