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  • Christian Armbruester

January Musings

The first week of January is always a bit strange when it comes to the markets. Usually there is a contrarian reaction to whatever happened in the month before. As such, the minor correction in equities was to be expected after the strong Santa rally which for some reason started in November last year. Bonds also came off. Again, not entirely surprising and pricing in seven rate cuts in 2024 was always a tad optimistic.

So where do we go from here? It's an election year in the US, there is a war in Europe and the Middle East. Earnings expectations are all over the place and the macro-economic picture is somewhere between a soft and hard landing. As such, making any sort of projections for this year is likely to be as accurate as predicting the weather for the Wimbledon final (there is a reason they built a retractable roof).

What we do know however is that rates have probably peaked unless central banks do something stupid (and cut too soon). That should support the bond markets. We also know that growth will be hard to come by as consumers are coming to grips with the on-going cost-of-living crisis. That might give some hope for all those value stocks that so massively underperformed the magnificent seven.

Finally, we know that artificial intelligence is here to stay. Governments around the world are so afraid, there is already talk of regulation before AI has even become mainstream. More importantly, companies are making huge investments into the technology. That’s good for sentiment and if you ever feel confused about where markets may go, just buy something that’s trading on a thousand times earnings.


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