January 2024 Market Recap

Share this article

January was an eventful month for markets and the economy - major US and European stock indices rose while emerging market equities continued their decline, and global bond returns were negative. The Federal Reserve’s commentary was more hawkish than expected at its January meeting and recent US economic indicators revealed robust resilience.

The markets: strong after a sluggish start

Global financial markets entered the year on the defensive with a risk-off tone. Heightened geopolitical risks and more hawkish central banks instilled caution among market participants.

The release of strong US economic data in January alleviated fears of a hard landing, prompting a market rally in the latter part of the month. The S&P 500 finished January up 1.7%.

Unlike stocks, global bonds returns were negative. Global bonds ended January down 1.4%, as major central banks signaled they may not begin cutting rates as early as markets had expected.

The heads of the Federal Reserve, European Central Bank, and Bank of England indicated they’ve ended their interest rate hiking cycles but need greater confidence that inflation is on a sustainable path towards 2% before they begin cutting rates.

The economy: resilient

US economic data released in January came in stronger than expected, especially in the second half of the month. Strong retail sales growth, improving consumer sentiment, and above-trend 2023 Q4 GDP growth all point to a resilient economy.

The December headline and core CPI both registered a 0.3% month-on-month rise, meaning annual growth stood at 3.4% and 3.9% respectively. Latest CPI data for January released on February 13th also came in ahead of expectations with the core year-on-year rate unchanged at 3.9%.

The Fed concluded their January meeting keeping interest rates unchanged, but Fed Chair Powell all but ruled out a first rate cut at the March meeting.

In this light, ISG continue to expect four 25-basis-point Federal Reserve rate cuts this year but have pushed back their expectation for the first rate cut to May from March previously.

What are we watching over the month ahead?

Inflation remains top of mind, and ISG is continuing to monitor incoming data, paying close attention to the jobs market. Wages continue to grow faster than 3.5%—the rate of wage growth which is likely to be consistent with the Federal Reserve’s 2% inflation target over the long run.

More persistent wage pressures could lead to stickier services inflation and prompt central banks to further delay rate cuts.

ISG is also keeping an eye on geopolitical developments and the risk they hold for global commodity prices and transportation costs. Shipping costs have increased sharply since the beginning of the year due to attacks in the Red Sea.

As a result, there are concerns around whether this alters the expectation that core goods inflation will remain mildly negative. At this stage it does not. Goldman Sachs Global Investment Research estimate that higher shipping costs will add no more than 0.1% to global core inflation.

This material represents the views of the Investment Strategy Group (ISG) in Goldman Sachs Asset & Wealth Management (AWM) and is not a product of Goldman Sachs Global Investment Research (GIR). It is not research and is not intended as such. The views and opinions expressed by ISG may differ from those expressed by GIR, LP, or other departments or businesses of Goldman Sachs. Past performance is not indicative of future results which may vary.

This material has been approved for issue in the United Kingdom solely for the purposes of Section 21 of the Financial Services and Markets Act 2000 by GSI, Plumtree Court, 25 Shoe Lane, London, EC4A 4AU, United Kingdom; authorised by the Prudential Regulation Authority; and regulated by the Financial Conduct Authority and the Prudential Regulation Authority; by Goldman Sachs Canada, in connection with its distribution in Canada; in the United States by Goldman Sachs & Co. LLC Member FINRA/SIPC; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in Japan by Goldman Sachs (Japan) Ltd; in Australia by Goldman Sachs Australia Pty Limited (ACN 092 589 770); in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198502165W); in Dubai by Goldman Sachs International, in Germany by Goldman Sachs Bank Europe SE; in Switzerland by Goldman Sachs Bank AG; in Spain by Goldman Sachs Bank Europe SE, Sucursal en España; in Italy by Goldman Sachs Bank Europe SE, Succursale Italia; and in France by Goldman Sachs Bank Europe SE Succursale de Paris.

No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient, without Goldman Sachs’ prior written consent. This does not constitute an offer or solicitation with respect to the purchase or sale of any security in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. This material is a solicitation of derivatives business generally, only for the purposes of, and to the extent it would otherwise be subject to, §§ 1.71 and 23.605 of the U.S. Commodity Exchange Act.

© 2024 Goldman Sachs. All rights reserved.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions.