Investment Update January 3, 2024

Last Week on Wall Street

In a holiday-shortened week, economic data was light, consisting of increases in home prices from the fall, while jobless claims continued to be little changed.

Global equities saw gains to close out the year, with emerging markets outperforming developed. Bonds saw minor gains as interest rates were stable to lower. Commodities fell back, largely due to continued weakness in crude oil.

U.S. stocks ended 2023 seeing gains for the ninth consecutive week, despite low holiday volume. By sector, defensive consumer staples, health care, and utilities led the way, each up around a percent. Energy stocks fell by over a percent, along with oil prices. Real estate also saw gains of nearly a percent, along with stable to lower interest rates.

Foreign stocks saw gains in developed markets, led by Japan, while emerging markets outperformed. In Europe especially, sentiment continued to focus on falling inflation and rising chances for interest rate cuts in 2024, especially as European Central Bank members publicly voiced reluctance to any further hikes. Emerging market gains last week were led by China, as government officials assuaged fears about further crackdowns on online gaming, after early comments had rattled sentiment negatively the prior week.

Bonds saw gains last week as a mid-week U.S. Treasury debt auction saw decent demand, with investment-grade corporates outpacing governments slightly. Foreign bonds were mixed, with strong gains in emerging market local debt. U.S. bonds ended the year with mid-single digit returns, similar to the yield of the index, which was a relief to more conservative investors having gone through the historically painful 2022. 

Commodities fell back broadly last week, with declines in energy offsetting gains in industrial metals. As the main driver, crude oil fell nearly -3% last week to $72/barrel. For the year, oil prices remain down -10% (falling as low as -20% from peak) as concerns over future demand (with still-weak growth in China) along with higher supplies than initially expected.