Macro
The positive performance of equity markets in November and December spilled into January as confidence the Fed would engineer a soft landing for the US economy, remained intact. Better than expected economic data pointed towards strong US growth and a buoyant employment market. The magnificent seven stocks that contributed to 70% of the returns for the S&P 500 in 2023 (or magnificent 6 if you remove Tesla’s poor performance this year thus far) – traded up and confounded market participants that expected a pull back in the sector.
With the employment data holding up, investors and central bank governors debated whether rates could remain higher for longer. Geo-political risks also loom over markets with trade disruptions for shipping in the Red Sea potentially inflationary. Corporate earnings were also in spotlight.
Global equities, as measured by the MSCI World, finished positively up 1.68%, while global bonds, as measured by the Bloomberg Global aggregate index, fell -1.4% on a total return basis.
December inflation and unemployment prints in the US and UK took centre stage. They remain key pillars of the key mandates for central banks which are inflation circa 2%, maximum employment and financial market stability.
