Telemus Weekly Market Review January 1st, 2024 - January 5th, 2024
Stocks concluded 2023 on a positive note, having risen for nine weeks straight, the longest streak of weekly gains since 2004. That positive tone came to a halt when the ball dropped on 2024. Stocks immediately sold off out of the gate on Tuesday’s session and finished the first week of 2024 with the S&P 500 down -1.5%. The technology heavy NASDAQ Composite, which rose 45% last year, had an even rougher start, concluding the week with a loss of -3.3%.
The selloff began with the start of trading on Tuesday with heavy selling pressure among many of 2023’s winners in the technology sector. We suspect many taxable investors were waiting until 2024 to adjust position sizes given the unexpected gains that occurred in 2023. The sour mood continued into Wednesday and Thursday’s sessions as well. Market sentiment seemed to shift away from its optimism for stocks and bonds, with more questions around the realistic probability of the U.S. economy achieving a soft landing.
In our view not much changed. We saw the last two months of 2023 overexaggerating what had been some optimistic economic data points. In fact, this past week there was a heavy dose economic data. The reports supported our outlook heading into the year that the economy remains in firm position, however, activity levels are moderating. During December, industrial activity slowed. New orders also fell from the previous month, an indicator of weaker activity to come. The number of job openings rose slightly indicating employment demand remains strong. The unemployment rate ticked back down to 3.7% with an acceleration in the number of jobs created. What we found mildly concerning from the December employment report was an acceleration in average hourly earnings, which have now increased 4.1% over the past year. This could have an inflationary connotation to it. The uptick in wage gains was most pronounced in the manufacturing sector, likely due to the UAW contract.
The challenge for markets in 2024 is going to be navigating an environment where the probability of an economic soft landing has increased, however, stocks and bonds have priced this in as a near certainty. There remains a lot of ambiguity on the direction of the economy and therefore we don’t believe it’s prudent to overemphasize the soft-landing scenario. As we look at the next week or two, it’s not unreasonable to expect some continued softness in asset prices as more investors elect to harvest some of 2023’s gains. Our focus is looking broader than the market adjustments that may occur in January, with a greater focus on indications for the direction of the economy and how asset prices reflect these conditions.
All opinions expressed in this article are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material has been gathered from sources believed to be reliable, however Telemus Capital cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Kovitz Investment Group Partners, LLC (“Kovitz”) DBA Telemus Capital. Telemus Capital is a division of Kovitz, a registered investment adviser with the Securities and Exchange Commission (SEC). Telemus Capital’s main office is located in Southfield, Michigan. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investment decisions should always be made based on the client's specific financial needs, goals and objectives, time horizon and risk tolerance. Current and future portfolio holdings are subject to risk. Risks may include interest-rate risk, market risk, inflation risk, deflation risk, currency risk, reinvestment risk, business risk, liquidity risk, financial risk, and cybersecurity risk. These risks are more fully described in Telemus Capital's Firm Brochure (Part 2A of Form ADV), which is available upon request. Telemus Capital does not guarantee the results of any investments. Investment, insurance, and annuity products are not FDIC insured, are not bank guaranteed, and may lose value. Any reference to an index is included for illustrative purposes only, as an index is not a security in which an investment can be made. Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. The S&P 500 index includes 500 leading companies in the US and is widely regarded as the best single gauge of large-cap US equities.
Advisory services are only offered to clients or prospective clients where Telemus Capital and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Telemus Capital unless a client service agreement is in place.