Markets Take A Breather After Strong Gains

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

After a 9-week win streak, equities gave back some gains to start the New Year.  The broad indices were down across the board last week.  Market breadth improved in the last few weeks of 2023, then the Fed provided gasoline for the fire when it hinted at rate cuts.  But, more than likely, the market got a little ahead of itself and took a pause last week.  In fact, Fed Futures have eased from a 73% probability of a rate hike in March to a 61% probability in just the last 5 trading days.  As we noted last week, markets tend to trade sideways during the first quarter of an election year, so a cooling off shouldn’t come as a surprise this January. 

From a technical standpoint, the market breadth is a positive sign of potential future returns.  When 90% of S&P 500 stocks trade above their 50-day moving averages after only 15% were at 50-day moving averages 50 days prior, markets tend to be positive 12 months later.  From an economic standpoint, the labor market remains resilient, as weekly jobless claims are well below recession signals.  In addition, real income, after inflation, continues to grow which is a good sign for the consumer.  The latest report on Factory Orders, higher by 2.6%, showed the highest one-month gain in more than 2 years.  Corporate earnings are trending in a better direction in 2024.  There are fewer earnings revisions lower than at this point in 2023 and fewer than the historical norm, so far.  Expect some additional bumpy trading as the market sorts out the next Fed move.

___________________________________________________________________________________________________________

Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. 

Past Performance does not guarantee future results.