Weekly Market Update- Week Ending 05/01/2024

First, please let me take the opportunity to wish you a Happy and prosperous New Year.

After a strong run for equities and bonds over the last couple of months, the Federal Reserve (Fed) officials poured a little water on the fire with the release of the minutes from its December meeting on Wednesday. While the minutes provided evidence Fed officials feel increasingly optimistic about inflation continuing to trend lower in the coming months, they were guarded to not commit to the timing of possible interest rate cuts, which the market (seemingly optimistically!) forecasts could come as early as March.

On consumer price inflation, they noted it “remained elevated but continued to show notable signs of easing” but stressed, “that it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably toward the Committee’s objective.” The Fed is next scheduled to discuss rates on the 30/31st January.

Over the festive period, UK Chancellor, Jeremy Hunt announced that the 2024 Spring Budget will be held on the 6th March. The budget looks likely to be the last fiscal event before a general election later in the year. With the Conservatives lagging in the polls, it is expected to include a raft of tax cuts aimed at rallying support for the government.

It promises to be a big year for elections, with more than 50 countries heading to the polls in 2024. While the timing of the UK election remains unknown, the main headline event for markets, the US election, is scheduled for Tuesday 5th November and promises to produce fireworks. It could see a repeat of the 2020 election if President Joe Biden stands against former President Donald Trump.

John Naylor, Chartered FCSI – Head of Investment Committee