January 29, 2024 •Nathan Willis
Key Events: An encore of great economic data
January is giving more of the positive economic data that characterized 2023: GDP surpassed estimates, with 3.3% growth in the fourth quarter and 2.5% for the year. Core inflation continued its decline and manufacturing activity continued its recovery.
The Q4 earnings season, however, has started in underwhelming fashion; fewer companies than average have beat expectations so far this quarter.
Market Review: Good data brings broad gains
This good data propelled the S&P 500 forward, up a percent for the week. Small and international stocks and bonds all joined the party this week but remain in the red for the year, far behind large cap stocks.
Outlook: Thinking about the long term
We know that stock markets move in cycles, and this affects the long-term outlook. This week we spend a minute thinking about long-term returns. The chart below shows the weight of the major stock markets over time. Poor returns sometimes follow a major peak in a country’s global stock market weight.
Japan became the largest market in 1989, then the Nikkei lost 80% over 14 years. The S&P 500 lost half its value after the US peaked during the dotcom bubble.
We aren’t predicting losses for the US based on the current 58% weight, but we also don’t assume stellar US returns will continue. Our portfolios maintain a sensible balance between US and international stocks.
Stock market size over time [1]
Navigator Outlook: January 2024
This material is intended to be educational in nature,[2] and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. OneAscent can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.
[1] Source: Visual Capitalist The Largest Stock Markets Over Time, by Country (1970-Today) (visualcapitalist.com)
[2] Source: Market Returns reference the following indices: Large Cap – S&P 500, Mid Cap Growth – Russell Midcap growth, Mid Cap Value – Russell Midcap Value, Small Cap – Russell 2000, Developed – MSCI EAFE, Emerging – MSCI Emerging Markets, Aggregate – Bloomberg US Aggregate, High Yield – Bloomberg High Yield
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