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January 2024 Monthly Outlook - What to Expect?

January 05, 2024

We hope your holidays and New Year were wonderful.

 

2023 was a very positive year in the financial markets.  The impact of high inflation and rising interest rates did not slow the economy or push us into the recession many economists were predicting for 2023.

Stocks gained 23.7% in 2023 after falling 21.1% in 2022 (Total Stock Market index VTI).

Despite 2023 gains, stocks are still approximately 2% below their all-time high set in December 2021, proving once again that the deeper the hole, the harder the climb back up.

Interest rates and bonds had quite a ride, with interest rates spiking from 3.9% to 5% from January to October, before falling sharply to finish the year at 3.87% (US 10yr Treasury)

 

What are we excepting in 2024?

 

  1. Inflation is trending lower and the Federal Reserve has shifted towards an easing bias. This should lead to lower interest rates.
  2. Jobs and the economy have held up well.  If that continues in 2024, the U.S. likely avoids a recession. We put the odds of recession at 40%, barring any escalation in current geopolitical turmoil.
  3. Both consumer and corporate balance sheets are healthy and liquid.  There are still record amounts on cash on deposit.
  4. Current expectations are for 3 interest rate cuts in 2024. However, the Federal Reserve has not promised any rate cuts and strong economic growth probably puts any rate cuts on hold.
  5. Some of this good news is likely already priced into the markets.
  6. Since the start of stock market data in 1928, years with gains of over 20% were followed by years of 5.9% gains on average. (source Yardeni Research)
  7. Predicting the financial markets is near impossible (see chart below from the “experts”), but based on all of the above we are forecasting stocks to gain 5% to 10% in 2024, with interest rates (US 10yr Treasury) holding in a range from 3.75% to 4%.

  

Source: All Star Charts

 

As always, we maintain a diversified investing approach with ongoing adjustments based on economic and financial market conditions.

 

We wish everyone a healthy and happy 2024.

 

January Calendar of Events   (comments and additions for future months are always welcome)

  • January is National Blood Donation Month.  Let’s all give a pint to help another.

 

January   5th                    My granddaughter Isys turns 18, and will be going off to college in September.  How did that happen?

January 10th                    My wife Elle’s birthday.  The big 60.

January 15th                    14th anniversary of my independent practice – a big thank you to all of my great clients.

January 15th                    Martin Luther King Day.  Let’s pray for more racial tolerance and understanding.

 

Sources:  Yardeni Research, All Star Charts, Larry Tentarelli

 

 

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.