Market Recap – January 19, 2024

Summary:

•         Weekly Returns* & YTD Returns*: [1]

*US Bond Market is Bloomberg Aggregate Index

*International Stocks is Morningstar Global ex-US Index

*Weekly Returns is Jan 16th, 2024-Jan 18th, 2024

*YTD is Jan 2nd, 2024-Jan 18th, 2024

The S&P 500 and other U.S. stock indices remained relatively flat over the past week, leaving them similarly unchanged on a year-to-date basis. International stocks continue to face challenges, particularly due to China’s economic weaknesses and ongoing conflicts in the Middle East. Bond prices declined in the past week as interest rates increased, fueled by concerns that inflation might resurge due to the shipping crisis in the Red Sea.

  • Government Shutdown: On Thursday, Jan 18th, Congress passed legislation to keep the federal government open into March, approving the third stopgap spending bill in fourth months. Congress has a deal to fund the government after Schumer and House Speaker Mike Johnson agreed to a $1.66 trillion appropriations deal in January, they just simply needed more time to pass it, which this stopgap spending bill provides. [2]
  • Middle East: For the 3rd time this week, the Houthis attacked a US owned commercial vessel in the Red Sea. The Houthis, an Iranian backed terrorist group in Yemen, have declared that “we are now in direct confrontation with the US and UK”, according to Houthi chief Abdul-Malik al-Houthi. The Houthi attacks have caused freight shipping rates to more than triple since November 30th. [3][4]

Chart of the Week:

Outlook:

  • Geopolitics: We expect the tensions in the Middle East to continue to boil These military conflicts pose a consist risk to shipping which have been shown by research to have spillover effects into inflation.
  • Inflation: Inflation showed some signs of picking up in December of We expect inflation to continue to cool a bit during Quarter 1 and then start to pick back up again due to geopolitical conflicts and government spending after that.
  • Interest Rates: We expect longer-term interest rates to continue to rise, which is consistent with our view that inflation will rebound in 2024. Longer-term interest rates have a high correlation to the combination of the growth in GDP and long-term inflation expectations.

Sources:

  1. https://www.morningstar.com/
  2. House, Senate pass short-term bill averting government shutdown until March (msn.com)
  3. Houthis Attack US-Owned Tankers, 3rd Time This Week, As Biden Admits Failure To Stop | ZeroHedge
  4. Drewry – Service Expertise – World Container Index – 18 Jan
  5. S. Consumer Sentiment Surges To More Than Two-Year High In January | Markets Insider (businessinsider.com)

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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