New Year Brings New Directions Among Global Equities

"Looking ahead to 2024, we identify two predominant factors shaping performance: Federal Reserve interest-rate decisions and the trajectory of the economy. Encouragingly, we anticipate both to generally favour positive outcomes this year. "

The first trading week of 2024 witnessed a decline in stocks, accompanied by an increase in interest rates, putting an end to the nine-week winning streak of the S&P 500. Given the significant upward surge over the past few months, it is understandable that the markets are now pausing for a breath.[EasyDNNnews:PaidContentStart]

The year 2023 has concluded, marking the end of the stock market's impressive winning streak. After enjoying nine consecutive weeks of gains, the S&P 500 finally paused, experiencing a moderate decline last week. This can be attributed primarily to initial repositioning at the beginning of the year and a natural breather following an outstanding 16 per cent rally in the final two months of the preceding year. 

Looking ahead to 2024, we identify two predominant factors shaping performance: Federal Reserve interest-rate decisions and the trajectory of the economy. Encouragingly, we anticipate both to generally favour positive outcomes this year. However, it's worth noting that the market entered 2024 with expectations even more optimistic than reflected in the previous rally. While optimism is welcome, it does introduce some vulnerability in the face of potential disappointments. 

In light of this, the past fortnight provided fresh data on both the Federal Reserve and the labour market. The latest labour market data has presented conflicting signals, with the headline figures generally exceeding expectations, yet underlying trends revealing a more nuanced picture. December's nonfarm payroll report, a closely monitored metric, showcased a robust addition of 2,16,000 jobs, surpassing consensus forecasts. Average hourly earnings maintained a steady monthly growth of 0.4 per cent, slightly exceeding predictions, and the unemployment rate defied expectations by holding steady at 3.7 per cent.

Surprisingly, the workforce participation rate experienced an unexpected decline to 62.5 per cent, marking its lowest point since February.



In terms of local currency, the pan-European STOXX Europe 600 Index concluded the past fortnight with a 0.55 per cent decrease, ending a streak of seven consecutive weekly gains as optimism for an early interest rate cut diminished. The major stock indices experienced predominantly negative movements. France's CAC 40 Index saw a decline of 1.62 per cent, Germany's DAX registered a loss of 0.94 per cent, and the UK's FTSE 100 Index slid by 0.56 per cent. However, Italy's FTSE MIB managed a modest gain of 0.29 per cent. 

The resurgence of inflation in the eurozone during December appeared to reduce the likelihood of early rate cuts by the European Central Bank. A preliminary estimate indicated a rise in annual consumer price growth to 2.9 per cent, up from a two-year low of 2.4 per cent in November. This increase was attributed to a reduction in government subsidies for electricity, gas, and food. On the other hand, a measure of core inflation, excluding the more volatile food and energy costs, eased to 3.4 per cent from 3.6 per cent. 

In China, stocks retreated amid ongoing concerns about its economy. The Shanghai Composite Index fell by 1.54 per cent, and the blue-chip CSI 300 declined by 2.97 per cent. Meanwhile, in Hong Kong, the benchmark Hang Seng Index experienced a notable 3 per cent decline.

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