All eyes on the Fed — Market Insights (January 2024)
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All eyes on the Fed — Market Insights (January 2024)

26 Feb
26 Feb

A lacklustre start to 2024

2024 started off with a whimper. January saw muted returns across most of the major markets. The “January effect”, the phenomenon where stock prices were seen to generally rise more in January than in other months of the year, was hopefully not a sign that tough times were to come. 

Even the Magnificent Seven stocks (Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia, and Tesla) returned a paltry 2.02% on average in January 2024. In contrast, the average return of the Mag 7 was 21.11% in January 2023.

Holding rates steady

The Federal Reserve decided in the January FOMC meeting to hold rates steady in the 5.25% - 5.50% range. This is the fourth time the Fed has decided to maintain the status quo on its policy rate. The rate decision came days after the release of US GDP growth for 2023. The US economy grew 3.3% in the fourth quarter of 2023, and an aggregate of 2.5% for the year. This was better than what most economists had predicted at the beginning of 2023. One of the largest drivers of this growth is consumer spending and the one factor that contributed to this was the resilience of the US labour market.

The market reaction to Federal Reserve chair Jerome Powell’s non-committal remarks on a soft landing for the economy was not unexpected, with equities falling on diminished hopes for a rate cut in the first quarter of the year.

The Fed continued to emphasise the need to monitor the path of inflation and gain confidence in its sustained stability before embarking on rate cuts.

January market commentary

The global equity market, as represented by the MSCI ACWI, returned a mere 0.59% in the first month of the year. This was a contrast to the decent 4.8% returned in the month before. The developed markets (DM) outperformed their emerging counterparts in a continuation of the trend that started in 2023. One of the strongest performing DM was Japan, which returned 4.6% in USD terms and a strong 8.5% in local currency returns. The US (S&P 500) returned a lacklustre 1.7% while MSCI Europe was almost flat with a return of -0.1%. 

Emerging markets as a whole, led by China’s disappointing return of negative 10.6% in USD terms, retracted 4.6%. Chinese stocks faced headwinds amidst lingering fears over the state of the property sector and the economy as a whole. India, on the other hand, generated a positive return of 2.4%. The “higher-for-longer” rhetoric on US fed funds rates weighed on investors’ minds amidst negative sentiment in EM.

In terms of style, value stocks again lagged growth stocks in DM. In EM, it was a different story with growth stocks falling more than value stocks. Similarly, from a size factor perspective, small-cap stocks underperformed large-cap stocks in DM by a significant margin while EM again bucked the trend with EM small caps besting their large-cap peers by almost 3%.

The bond markets experienced a reversal and a decline in returns as hopes of a near-term Fed rate cut withered. Bond yields went up almost across the board. Investment grade corporate bonds saw negative returns but still outperformed sovereign bonds. High yield also generally outperformed relative to investment grade.

Commodities rebounded in January with the S&P GSCI returning 4.5%. The primary driver of this strong performance was the energy and oil sector. The GSCI Crude oil sector rose 6.2% and the Energy sector went up 7.2%. Gold was in negative territory for the month with a decline of 0.7%. 

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Risk Warnings

Investment involves risk. Past performance is not an indicator nor a guarantee of future performance. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. 


Whilst Endowus HK Limited (“Endowus”) has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or typographical errors.

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