Weekly Update

Market backdrop:

The S&P 500 saw modest gains last week after hitting consecutive record highs as tech stocks rallied. The 10-year Treasury yield was steady, floating near its 2024 highs of roughly 4.16%. Data showing robust U.S. growth in the last quarter of 2023 while core inflation fell back to 2% annualized bolstered the market’s soft landing hopes. We think that should sustain the stock rally for now, but December PCE data confirmed that an inflation rollercoaster could challenge the momentum. Meanwhile, Chinese stocks rebounded as officials rolled out policy stimulus – but they remain down for the year.

We expect the Fed to hold interest rates steady at its policy meeting this week after signaling that rates have peaked at its last meeting. We don’t think the Fed will be able to cut rates as quickly or as much as markets are pricing. Growth will need to be much weaker than in the past to keep inflation down given ongoing wage pressures and structural shifts like geopolitical fragmentation. Yet the level at which rates start to dampen growth is higher than before the pandemic.

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Week Ahead:

Jan. 30

U.S. consumer confidence; euro area GDP

Jan. 31

Fed policy decision

Feb. 1

Bank of England policy decision; euro area inflation

Feb. 2

U.S. payrolls

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We “mirror” a model strategy from BlackRock (the largest asset manager in the world).

The commentary above is provided by BlackRock, Inc and is just a snippet of the full weekly commentary they produce.

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