January 2024 Newsletter

Market Commentary

With the fourth quarter coming to a close, we saw a major rally in the equity and bond markets.  The S&P 500 index finished the year with nine consecutive weekly gains, rising 24.23%, only .56% off its closing high set in January 2022. The Magnificent Seven, composed of Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla, finished the year in remarkable fashion, with an average total return of 104.7%. The Dow Jones Industrial Average finished the year with a 13.7% return, while the Nasdaq Composite saw a 43.42% increase for the year, fueled by the advancements in the Artificial Intelligence space. 

The bond market finished the year with a rally as well. The 10-year US Treasury Note yield rose to 5.021% in October, a rate not seen since 2007, then fell to a low of 3.785% at the end of December. The rally can be attributed to more dovish language coming from the Fed, as investors anticipate interest rates declining in the future. The 2-year US treasury note closed the year at 4.25%, after reaching a 17-year high of 5.548%.  The spread between the 2-year and the 10-year notes, often used for economic predictions, narrowed to –.384.  A negative spread means that rates are higher at the shorter end of the yield curve and usually seen as a recession indicator.  Interestingly, the spread has been negative since July of 2022 and we have yet to see a recession.  

The inflation numbers from November showed a slight slowdown in rising prices. In the twelve months ending November 2023, the Consumer Price Index increased 3.1%, after an increase of 3.2% from October 2022 to October 2023. The increase was attributed to a 2.9% rise in food prices and a 6.5% rise in shelter cost.  Energy prices decreased 5.4% with the help of declining oil prices in the fourth quarter. OPEC oil production cuts provided upward pressure on oil prices by the end of September with Brent reaching a high for the year of $98 a barrel.  After a decline from those highs, the Israel-Hamas conflict sent prices rising again to $91 a barrel.  Initially, prices remained high as fear of wider conflict kept the pressure on, but as those fears eased, prices fell. By mid-December, there was another spike in prices as tensions rose over the attacks on the shipping vessels in the Red Sea. The cost to ship goods, including oil, increased as the risks of traveling through the Suez Canal forced shippers to reroute ships around the southern horn of Africa. 

The price of an ounce of gold rose 11.1% for the quarter to an all time high of $2,095.80, while silver has remained flat for the year. Demand for gold has remained strong as investors see uncertain economic projections and geopolitical tensions continuing to rise.