Monthly Market News January 2024 – Trends in the markets

Alexandre Gauthy - Economist

January was a positive month for global equities. The major trends seen in 2023 continued throughout the month: underperformance of emerging markets and investor optimism about AI-related companies. Our expert Alexandre Gauthy analyses the market trends in January 2024.

Equity markets: equities on the rise

During the month of January, global equities rose by 2.5% in euro terms. Japanese (+6.4%) and U.S. (+3.4%) equities outperformed other regions, including Europe (+1.5%) and emerging markets (-2.8%). After a slight decline at the start of the year, equity markets rose in the second half of the month, helped by supportive economic conditions for risk assets.

During the month of January, the S&P 500 index set a record for the first time since early 2022. Overall, equities continued their positive momentum from the fourth quarter of 2023, although the broadening of market leadership seen in December disappeared again: several names in the Magnificent Seven (such as NVDA +24.2%) posted significant gains, while the equally weighted S&P 500 retreated, as well as the prices of companies with smaller market capitalization. Electric vehicles were among the groups under pressure during the month.

Bond markets: yields rise slightly at the start of the year

Government bond prices fell in January as investors somewhat reduced their expectations for central bank rate cuts at the start of the year from the high level of expectations prevailing at the end of 2023. This dynamic has pushed up 10-year government bond yields somewhat. Eurozone government bond prices fell by 0.4% in January. Other fixed income segments outperformed government bonds: high-quality corporate bonds delivered a slightly positive return, while high-yield bonds delivered a positive return of 1%.

Central Banks: Fed and ECB Meeting

In line with expectations, the Fed and the ECB kept their key interest rates unchanged in January. At the ECB's press conference, President Lagarde reiterated that monetary policy remains data-dependent and that many important economic indicators will be released in the coming months. For its part, the Fed left its key interest rate unchanged between 5.25% and 5.50% at the end of January and abandoned its tightening bias in its statement. The new monetary policy statement warns that the FOMC "does not expect it to be appropriate to cut rates until it has gained greater confidence that inflation is sustainably close to 2%."

Currencies: a good start to the year for the dollar

Against the euro, the dollar ended the month up 2% at 1.08 per euro. Among other currencies, the Australian dollar depreciated 1.6% against the euro. The British pound strengthened by 1.7% against the euro in January, following the release of higher-than-expected inflation figures in the UK. Finally, the yen lost ground against the euro and the dollar due to the long-term interest rates differential moving in favour or the euro and the dollar.

Commodities: no big moves apart from the rebound in oil

Gold prices remained relatively flat after hitting a new all-time high in December, losing 0.2% on the month. Oil gained ground after the previous three months' fall, with WTI crude ending the month up 5.9%.

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