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CIO Strategy BulletinArticle07 Jan 2024

Potential Opportunities After a Strong 2023

CIO Strategy Bulletin

Investors can easily be misled by share price movements around holiday periods when market volumes and liquidity are low.

Key takeaways from this week's bulletin:

  • For the last two months of 2023, both stock and bond markets went in one direction, up. For the fourth quarter of 2023, global equities rose 11.0% and bonds +6.8%. This was driven by convincing data showing that the Fed would not need to crash the US economy to push inflation lower.
  • The fact that equities and bonds rose together in the final quarter of 2023 shows how important the expectations for a change in Fed policy - from driving down inflation to potentially protecting an economic recovery - has been.
  • In 2023, the stock market indices were driven higher by large gains for a handful of firms. Yet, the first few days in 2024 indicate that investors doubt that multi-trillion-dollar US tech franchises can continue to beat earnings expectations after a projected 44% earnings per share (EPS) gain in 2023.
  • Investors can easily be misled by share price movements around holiday periods when market volumes and liquidity are low.
  • For 2024, we believe a broadening recovery for the equity market is likely to co-exist with a pause and more volatility for last year’s leaders.
  • The expectation for near-immediate Fed easing is impatient and exaggerated. Yet the economic outlook is pointing to a healthier growth period ahead even if the Fed does not provide immediate rate cuts.

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