Financial Market Commentary

Monthly Market Commentary

January 2024 Edition

These monthly market commentaries share a synopsis of the U.S. financial markets with intelligent insights.

January Investment and Economic Commentary

Happy New Year everyone!

After one of the worst years for investors in 2022, the markets truly shook off the negative sentiment driven by expectations of a recession induced by a perceived overly aggressive Fed and bounced back strongly in 2023, particularly in Q4. 

While mega-cap growth stocks led the market higher for the full year, it was small-cap stocks that may have quieted their haters with big returns in December.  On the bond side, interest rates fell 1% from mid-October through year-end, spurring a big enough rally to lift the Bloomberg US Aggregate into positive territory for the year, avoiding a third straight negative return.

Here are a few observations on the markets for the month, quarter, and year. 


  • The S&P 500 was up 4.5% in December, 11.7% in Q4, and 26.3% in 2023.
  • The MSCI ACWI ex USA was up 5.0% in December, 9.8% in Q4 and 15.6% in 2023.
  • The Bloomberg Aggregate was up 3.8% in December, 6.8% in Q4, and 5.5% in 2023. 

Domestic Equity

  • Domestic equity markets across all styles and market caps ended the year positive after a tumultuous year led by recession fears and geopolitics. In December the stock market benefited from a Fed forecast indicating plans to cut interest rates three times in 2024.
  • Small cap stocks had a great month, handily outperforming large and mid cap stocks. The Russell 2000 index recorded its biggest monthly gain in three years. The significant outperformance can be attributed to investors projecting improved earnings for small caps as interest rates decline and the US economy avoids a deep recession.

International and Global Equities

  • Foreign stocks posted positive returns and outperformed US stocks in December. Growth outperformed value in Q4 while value stocks outperformed for the year. 
  • Emerging market equity returns underperformed developed markets during December, largely due to the 2% decline in China. Disappointment in China's post-COVID recovery has been the demise of Chinese stocks in 2023.  MSCI EM ex China was up 20% for the year.
  • A weakening of the US Dollar added to the improved performance of foreign stocks.

Fixed Income Markets

  • The US bond market delivered positive returns as investors were relieved by the Fed's interest rate policy shift. US interest rates declined by 1% during Q4, sparking a year-end rally. 
  • The Q4 recovery saved the Bloomberg Aggregate from posting a third consecutive negative calendar year return. 

Specialty Markets

  • REITs continued a rebound that started in November due to strong demand for data centers and potential for lower long-term rates. Commodities posted a negative return due to falling oil prices.

US Equity Sectors

  • Among the 11 major sectors of the S&P 500, Energy was the only negative sector, while Real Estate was the best-performing sector led by positive momentum on the prospect of a lower interest rate environment in 2024.
  • For the year, Information Technology and Communication Services were the big winners, up more than 55%.  Energy and Utilities were the only negative performing sectors. 

Dear Valued Investor,

Stocks defied the skeptics in a very unpredictable 2023. The Dow Jones finished at a record high on December 28, and the S&P 500 came within a whisker of a fresh all-time high after the index rallied more than 20% for the year.

It wasn’t only stock investors who had plenty to cheer about. Bond portfolios, which struggled mightily along with stocks in 2022, staged a furious late-year rally. Bloomberg’s broad bond market benchmark returned a solid 5.5% for the year after being negative year to date as late as October.

Last year was especially gratifying given the pessimism at the outset. It also offers some important lessons for investors:

  • Don’t always follow the herd. They’re right at times, but wrong more often than you think. As recently as May 2023, Wall Street strategists forecasted 4,017 for the S&P 500 at year end—about 19% too low. Stocks rise about three times as often as they fall, so be wary of bearish herds.

  • Consider cycles and trends. Stocks rarely fall two years in a row. Year three of the four-year presidential cycle (e.g., 2023) has been the best over time. Bear markets tend to recover losses in under a year in the absence of recession (the last bear ended in October 2022). Historical cycle averages point to mid-to-high single-digit gains for stocks in 2024.

  • Don’t bet against the U.S. consumer. Every economic cycle is different, but the post-pandemic recovery distorted the economy such that traditional economic indicators misled many economists. One takeaway here is stimulus matters—for example, low interest rates, stimulus checks, student loan forgiveness, and even infrastructure spending. Another takeaway is that consumers with jobs will spend. The unemployment rate remains near 50-year lows.

  • Focus on the long term. This unusual economic cycle made it extremely difficult to predict where stocks were going, reminding us that “time in the market” is a better mantra than “timing the market.” Waiting it out through the down periods, even through wars, a banking crisis, and widespread calls for recession, is the best approach for nearly all investors.

These are all great lessons to tuck away as we turn to 2024. The year may not bring quite as much joy to your portfolio, but with inflation down, unemployment low, corporate fundamentals in good shape, and the Federal Reserve poised to cut interest rates, the ingredients for another profitable year are in place.

I wish you a joyful and prosperous 2024. As always, please reach out to me with questions.

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Scott Krase
Wealth Manager
Connor & Gallagher OneSource (CGO)

Securities offered through LPL Financial, Member FINRA & SIPC.  Investment advisory services offered through Global Retirement Partners, LLC DBA Connor & Gallagher OneSource, an SEC registered investment advisor.  Connor & Gallagher OneSource and Connor & Gallagher Benefit Services are separate entities from LPL Financial.

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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of August 3, 2022.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. Connor & Gallagher OneSource doesn’t provide research on individual equities. All information is believed to be from reliable sources; however Connor & Gallagher OneSource makes no representation as to its completeness or accuracy.

Contact Scott With Any Questions or if You Would Like a Review of Your Portfolio


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