January 2024 Monthly Recap
Market Snapshot
*As of 01/31/2024
By the Numbers
  • 353,000 new jobs were created in January 2024
  • Unemployment stands at 3.7%, with an average of 244,000 new jobs created each month over the past year
  • Private investment in manufacturing structures finished the month up nearly 50% from year-ago levels.  Manufacturing facilities investment has never made a larger contribution to U.S. GDP in recorded history (since 1947)
  • The regional banks sub-industry of the S&P 500 has fallen 2.4% this year, while the overall financial sector has risen about 3.5%, indicating broader strength in financials despite individual-bank weakness among the regionals
Federal Reserve Update

The Federal Reserve announced on January 31 that it is keeping rates steady and closed the door on additional rate hikes. However, they also stated that the FOMC would need “greater confidence that inflation is moving sustainably toward 2 percent” before cutting rates, and Chair Jay Powell emphasized at his press conference that a rate cut is unlikely at its next meeting in March. This led to a shift in market expectations around the beginning of rate cuts, leading the S&P 500 to close 1.6% lower.

However, this was then followed by positive returns of 1.2% and 1.1% on the next two days as markets quickly adjusted. At the moment, markets have downgraded the path of policy rates by one cut, expecting a total four or five by year end. Clearly, this is a case of the market getting ahead of itself with lofty rate cut expectations. The gap between what the Fed has previously communicated – possibly three cuts this year – versus what the market anticipates, is an ongoing source of market uncertainty.

In contrast to many current investor concerns, there are many signs that the economy is fundamentally strong. The latest jobs report showed that 353,000 new jobs were created in January, far more than the 185,000 economists expected. December payrolls were also revised up sharply to 333,000, bringing the average monthly gain over the past year to 244,000, a very healthy pace. The unemployment rate remains at 3.7%, one of the lowest in history. While job openings have declined as the Fed has raised rates, there are still nearly 1.5 job openings per unemployed person across the country.

This is the case despite layoff announcements from large companies as they attempt to reduce costs and maintain profit margins. Many of these layoffs are a reversal of the rapid hiring that occurred during and after the pandemic, especially among large technology companies such as Alphabet, Microsoft, PayPal and many others. While these layoffs clearly have an impact on individuals and households, perspective is needed when considering the effects on the economy and markets. The jobs data show that while the Information sector gained “only” 15,000 jobs last month, sectors such as Professional and Business Services, Health Care, and Retail Trade added 74,000, 70,000, and 45,000, respectively.

There are always reasons to remain wary of the markets, but today’s foundational strength of low unemployment and the prospect of rate cuts (even if the timing forecast is imperfect) indicate a potentially favorable investment backdrop that has so far withstood the predictions of more bearish investors.

Sources: Clearnomics, Bureau of Labor Statistics
© 2024 Clearnomics, Inc.

The views expressed represent the opinions of Tiller Private Wealth as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed. 

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website, https://adviserinfo.sec.gov. Past performance is not a guarantee of future results.

The market indices discussed are unmanaged. Investors cannot directly invest in unmanaged indices.

The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The market index is unmanaged.

The NASDAQ Composite Index is an unmanaged, market-weighted index of all over the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

Data sources: Clearnomics, YCharts, BankRate, Carlyle, US Federal Reserve