2024 has started on a somewhat positive note. The S&P500 is up slightly year-to-date. Economic news has been mixed. Let’s look at what has happened so far, and what to look out for. Premium subscribers will also get analyst forecasts and what is in my portfolio.
Key economic data in the US points towards a possible soft-landing. CPI inflation arrived slightly above expectations at 3.4% y/y (0.3% m/m). Core Cpi inflation remains stubbornly high at 3.9% y/y (0.3% m/m). This was supported by shelter (up 0.5% m/m). However, the market’s rate expectations remained largely unchanged, with predictions that the Federal Reserve will cut rates at least three times in 2024.
Jobs data was also solid. Hourly earnings increased 4.1% y/y (up from 4% in the prior period and 3.9% expectation). The workweek declined slightly to 34.3 hours (from 34.4 hours). The unemployment rate remained at 3.7%. Nonfarm payrolls beat expectations. While this would often be seen as inflationary, potentially reducing expectations of a rate cut, it appeared to be interpreted as consistent with a soft landing (viz., inflation decelerating while employment remaining solid).
Outside of the United States, my focus is Australia. Australia’s CPI inflation fell to 4.3% y/y, which is significantly above the Reserve Bank’s target range. Excluding volatile items, CPI increased 4.8% y/y. China would also weigh on Australia, with China’s economy struggling with deflation (CPI fell 0.3% y/y; PPI fell 2.7% y/y).
The mixed data could point towards the market’s relatively tepid start to the year.