January 2024 Market Insights
Most developed markets enjoyed an ongoing rally as interest rate cuts are anticipated sometime in 2024, despite some warnings from central banks that loosening monetary policy is not imminent.
Written by Kevin Hua Co-founder & Chief Investment Officer
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What happened to the markets in January 2024?
Most developed markets enjoyed an ongoing rally as interest rate cuts are anticipated sometime in 2024, despite some warnings from central banks that loosening monetary policy is not imminent.
The best performers were Japan’s Nikkei 225 Index and TOPIX Index, which were up +8.43% and +7.81% (local prices) respectively. The largest negative performances were once again, Hong Kong’s Hang Seng HSCEI Index and HSI Index, down -9.96% and -9.16% (local prices) respectively.
The -3.71% fall by the AUD against the USD, benefitted AUD returns for the Trends and indices.
Strong economic data and corporate earnings in the U.S.
Strong corporate earnings especially in the technology sector and economic data spurred continued optimism for imminent rate cuts in 2024. However, interest rates were kept on hold in January at the current 5.25% to 5.50% range with a March cut also unlikely.
GDP growth was 3.3% in 4Q 2023 on an annualised basis, while yearly growth was 3.1%. Inflation rose slightly to 3.4% while the unemployment rate was stable at 3.7%. One negative data point was the purchasing managers’ index at 49.1 (still in contraction) but it is trending up from previous periods.
Mixed economic data in Europe
A similar story to the U.S. played out in Europe as inflation rose from 2.4% to 2.9%, therefore ruling out any short-term interest rate cut. The European Central Bank kept interest rates unchanged in January meeting. Economic growth remains stagnant in the European Union (0% in 4Q 2023).
Inflation in the U.K. rose back to 4.0% in December, up from 3.9% in November. Other data was mixed as economic and wage growth slowed. Whilst tax cuts have been flagged, there is increasing pressure to reduce interest rates to help bolster the economy.
Japanese equities run while Chinese equities drag behind
The Japanese had a strong month with foreign investors being bullish on expectations of structural changes in Japan, such as the launch of the new NISA (Nippon Individual Savings Account) for Japanese retail investors. The Tokyo Stock Exchange pushed forward with its corporate governance reforms, giving investors added confidence in disclosure and management alignment.
Weaker economic growth in China continues to be the theme and impacted markets in China, Hong Kong, and South Korea. The underperformance in Chinese equities is being caused by a sustained slowing of economic growth, factory output contracting and the continued structural decline of China’s real estate market.