Market Recap – January 12, 2024

Summary:

•         Weekly Returns & YTD Returns: [1]

*US Bond Market is Bloomberg Aggregate Index

*International Stocks is Morningstar Global ex-US Index

The S&P 500 and other stocks indices recovered this past week after falling over -2% in the opening week. International stocks continue to struggle with China’s weakness and conflicts in the Middle East. Bond prices rose this week as rates dropped on hopes of the Fed cutting interest rates.

  • Bitcoin ETF’s: On Wednesday, 10, the Securities and Exchange Commission (SEC) approved the first-ever spot Bitcoin ETFs. On the first day of trading, $4.6 billion worth of Bitcoin ETF shares changed hands, suggesting there is broad scale demand for the product. Bitcoin is considered by some to be a form of “digital gold”, although, the jury about its long-term durability as a safe haven has a long way to go until it is in the conversation of precious metals. [2]
  • Middle East: The US and UK led major strikes on Houthi-controlled areas of Yemen on Thursday night, which increases the risk of a regional war breaking out. Houthi sources have tallied over 70 strikes across 5 regions of These strikes are in response to the Houthis continued aggression in the Red Sea against shipping and US military personnel. [3]
  • Inflation: Inflation numbers, as measured by CPI, came in hotter than expected this week. CPI increased 3.4% year-over-year, when it was expected the numbers would come in at 2%. This is important because the Federal Reserve is basing their interest rate decisions off inflation getting back to its 2% long-term target. [4]

Chart of the Week:

Source: BLS.gov

Outlook:

  • Geopolitics: We expect the tensions in the Middle East to continue to boil These military conflicts pose a consist risk to shipping which can have spill over effects on inflation.
  • Inflation: Inflation showed some signs of picking up in December of We expect inflation to cool a bit during Quarter 1 and then start to pick back up again due to geopolitical conflicts and government spending after that.
  • Labor: We expect labor markets to continue to cool over the coming months. Full-time jobs have already begun to drop in recent months, with part-time jobs picking up some of the slack. This is a classic signal of a slowing labor market.

Sources:

  1. https://www.morningstar.com/
  2. Bitcoin’s $4.6 billion ETF debut was a success (msn.com)
  3. Houthi rebels vow retaliation after US and UK air strikes in Yemen (armytimes.com)
  4. Consumer Price Index for All Urban Consumers: All Items in S. City Average (CPIAUCSL) | FRED| St. Louis Fed (stlouisfed.org)

Bridge Advisory LLC Disclosures

Bridge Advisory, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Investment Advisory Services offered through Bridge Advisory, LLC. Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Information herein has been obtained from sources believed to be reliable, but Bridge Advisory, LLC. does not warrant its completeness or accuracy; opinions and estimates constitute our judgment as of this date and are subject to change without notice. This newsletter expresses the views of the authors as of the date indicated and such views are subject to change without notice.

By: Nick Colletta, CFA, CAIA

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