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Weekly comment: Stocks pull back at start of 2024

Date: 10 January 2024

3 minute read

Weekly podcast – Market overview

This week’s host, Investment Manager, Chris Scott discusses the ups and downs of the past week with Head of Fixed Interest Research, Richard Carter and Carly Moorhouse, Fund Research Analyst. Among the topics discussed – inflation, interest rates and what markets will focus on next.

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Market overview: Alan McIntosh, Chief Investment Strategist

Financial markets started the New Year on the back foot after a strong end to 2023, as expectations for aggressive interest rate cuts were reined in a little. The MSCI AC World Index declined 1.6% with global bond yields edging higher.

A multi-week winning streak for equities ended in the first week of January with last year’s best performing regions and benchmarks experiencing larger pull backs. Broad US indices fell 1.5% but tech benchmarks – the standout performer in 2023 – came under some heavier selling pressure to end the week down 3.2%. There was not a clear catalyst for the weakness and the declines should be viewed in the correct perspective with markets still comfortably above their start of December levels. It should also be noted that the first week was truncated due to holidays and volumes were fairly light, as if often the case at this time of year.

The UK held up relatively well with its blue-chip benchmark decreasing 0.6%. In keeping with the price action of last year, Europe ex UK was somewhere in between the UK and US, falling 0.7% on the whole although there were larger declines in Germany (-0.9%) and France (-1.5%). The UK 10-year gilt yield increased markedly on the week to 3.79%, up 26 basis points. The pound ended the week little changed against the US dollar at 1.27.

US employment remains strong

There was little in the latest US jobs report to suggest imminent interest rate cuts from the Federal Reserve (Fed), even if there were some hints of weakness around the fringes. The headline number came in stronger than expected, showing 216k job added in December, and wage growth also topped forecasts to remain steady at 0.4% month-on-month. Meanwhile, a decline in the labour force participation rate meant that the unemployment rate remained unchanged at 3.7%. 

Those looking for signs of softness will point to the downward revisions to the November and October figures but on the whole the release supports those pushing back against the likelihood of monetary policy easing in the first quarter of the year. Interest rate futures were assigning a 100% probability that the Fed would cut in March, but this now looks less certain with pricing indicative of a roughly 70% chance they move to reduce rates.


Christopher Scott

Investment Manager

Richard Carter

Head of Fixed Interest Research

Carly Moorhouse

Fund Research Analyst

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