January 2024 in Review

by Daniel Zeigler, CFP®, CMFC®, Senior Portfolio Manager

Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. Today I just wanted to spend a few minutes to give you an update on the markets for the month of January.

Market Returns for January

The stock market continued its upward trend this month with the S&P 500 up a little over 1.50%. The largest tech stocks, which dominated the stock market last year, have once again rallied in January. The group has pulled the S&P 500 back to all-time highs for the first time in two years.

The bond market was fairly quiet in January as the 10-year Treasury has now moved below 4% and is now yielding close to 3.85%.

GDP

The U.S. economy increased at a 3.3% annual rate in the 4th quarter, easily beating the consensus expectations of 2.0%, albeit down from the 4.9% gain in the 3rd quarter. The largest positive contribution came from personal consumption, business fixed investment, and home building. For all of 2023, the U.S. economy accelerated at a 2.5% annualized pace, the most in two years. We would expect GDP to continue to slow in 2024.

Federal Reserve

The Fed wrapped up their first meeting of the year at the end of January and as expected, they left interest rates unchanged, which keeps the target range for the federal funds rate at 5.25-5.50%. Fed Chair Jerome Powell began his post-meeting press conference by reiterating that inflation is “still too high,” however, they sent a signal that they are done raising interest rates. Powell also put cold water on the idea of a rate cut at their March meeting as inflation is still running above the central bank’s target. The Fed has been pleased with the progress of inflation dropping in recent months with core prices in December, which exclude food and energy, were up just 2.9% from a year ago, according to the Fed’s preferred inflation indicator. That’s a smaller increase than the 3.2% core inflation rate that the Fed officials had projected in December.

Corporate Earnings

Investors are keeping a close watch on the mega cap companies that have already started reporting their quarterly earnings results. So far, with almost 50% of the companies reported, the overall earnings growth has been slightly negative with a sales growth around 3.5%; however, the aggregate earnings have surprised to the upside. Stock valuations are on the higher end, with the current forward 12-month price-to-earnings ratio around 20x, which is above the 5-year average of 18.9 and above the 10-year average of 17.6. Analysts are still expecting earnings growth for the year to be around 10-12%.

Outlook

The economy continues to stay resilient as the 4th quarter GDP came in better than expected. The market will be closely watching the jobs number on February 2nd, which economists are expecting to show 185,000 workers being hired. As always, thanks for joining me for this month’s market recap.