The US Stock market suffers a loss in the in the first week of 2024, breaking a nine-week-long streak of gains.
Amidst a stronger than expected jobs report, the idea of a soft landing for the US economy in 2024 is increasingly becoming a reality. This is evident in nonfarm payroll data revealing an additional 216,000 jobs being added in December, far exceeding expectations of 175,000. As a result, this complicates the current outlook for rate cuts from the Federal Reserve. Given the inverse relationship between share prices and interest rates (I.e. as bonds become more attractive, and speculation that firm earnings will fall), this resulted in the S&P500 and NASDAQ being down 2% and 4%, respectively in the first week of the year. Amidst traders digesting this information, bond markets consequently experienced volatility too, with the yield on 10-year treasury bonds reaching beyond 4%, before dampening back to 3.95%.
Nonetheless, as inflation has declined significantly from post-pandemic-era highs, the US Federal Reserve expects to implement three rate cuts over 2024. Although this theoretically bodes well for the US stock market, financial professionals have advised that the stocks’ stellar performance in 2023 will likely not persist in 2024. This stems from the fact that the year-end rally in 2023 was forward-looking, already reflecting expectations of lower interest rates in 2024.