January 2024 | Monthly Economic Update
Markets finished the year strong, with positive returns across most major asset classes in December. Investors reacted positively to the Federal Reserve’s dovish comments regarding monetary policy, with interest rate cuts potentially coming sooner in 2024 rather than later. Among major regions, international developed equities led December with a gain of 5.3%, followed by US equities up 4.5% and emerging market equities up 4.0%. Emerging markets were held back by China, with growth concerns persisting as China’s index fell 2.4% for the month and about 11% for the year.
Sector performance in the US was nearly all positive, with only energy falling narrowly in the negative. Oil was a driving factor for energy’s underperformance, with demand concerns looming as well as strong supply being provided by non-OPEC producers. Real estate and other interest rate-sensitive sectors saw the strongest returns as the market priced in rate cuts in 2024. Small-cap and value stocks had a strong month in response to lower potential interest rates as well, outperforming their large and growth counterparts, which were dominant for most of the year.
After a volatile 2023, bonds closed out the year with positive performance, with most major indices seeing gains in December. Gains were driven by expectations of rate cuts, a weakening dollar, and tightening credit spreads. Longer-dated bonds and credit-risky bonds, such as corporate and high-yield bond classes, had the strongest relative performance for the month.
Commodities were one of the few areas of weakness in December, with the broad index falling by 2.7%. Despite gold and industrial metals posting positive returns, most other commodity indexes faltered, with soft commodities like agricultural products and energy leading the decline. REITs, gaining 9.2%, saw some of the strongest performance in December with the prospect of rate cuts.
The Monthly Riddle
What’s right and never wrong?
LAST MONTH’S RIDDLE: What must be in the oven yet can not be baked?
Grows in the heat yet shuns the light of day?
What sinks in water but rises with air?
Looks like sand, but is fine as hair?
Tip of The Month
Consider scheduling a consultation with your financial advisor early in the year. This can be a helpful step in assessing your financial situation and exploring potential goals for the 2024.
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