Investors’ hopes were running high into the start of 2024, but the S&P 500 index started the year by stripping 2.2 per cent off its December 2023 peak while the all-important 10-year US Treasury yield has jumped back up from a recent low of 3.78 per cent to around 4 per cent. Investors have been cautious in the opening sessions of 2024, as they awaited further clarity on when interest rate cuts will begin, and how quickly they will happen.
Hopes for a swift pace of easing had triggered a blistering rally in the final weeks of 2023, which took the S&P 500 to within 1% of its all-time high, so any undermining of that hypothesis has been a cue for profit-taking.
So, no surprise then we could be in for a rocky stretch in the markets.
Friday’s session saw markets gyrate throughout the day, as investors absorbed the latest macroeconomic data which offered contrasting views on when interest rate cuts may begin.
Looking further ahead, investors will parse the message from the Fed at the end of its Jan. 30-31 policy meeting. Markets expect the central bank to leave rates unchanged this month, and bets on a cut at the March meeting have been pared back.
The 10-year German Bond is a important benchmark, and was last at 2.1740, up 3.28% perhaps sending a message globally about the direction of interest rates.
The Australian share market rounded out its worst start to the year in more than a decade on Friday, as the broad rally staged in the final months of 2023 lost steam.
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