The Monthly Review: January

The year 2023 ended with strong performances for both stock and bond markets, supported by the narrative of six interest rate cuts by the Fed, thanks to a growing economy and controlled inflation. However, at the beginning of 2024, expectations were disappointed when Powell indicated that a rate cut in March was unlikely, emphasizing the importance of better inflation data.

Currently, the economic context presents warning signs, with the Fed communicating caution and fears of a resurgence of inflation. The S&P 500 has reached new highs, driven by its "magnificent seven," although Tesla has had a poor start to the year. Economic reports have generally been good but not extraordinary.

Meanwhile, yields on 10-year Treasuries have been volatile, showing that stock investors are optimistic while bond investors are more skeptical. It is noted that investor participation in the 2023 rally has been low, with a possible beginning of a distribution phase, allowing large investors to exit while demand remains. In the event of a significant decline, buying opportunities may arise for those who are not afraid of volatility.