Despite periods of volatility, developed equity markets finished in positive territory in January 2024, as investors’ optimism about the global economy offset concerns regarding geopolitical tensions in the Middle East and Ukraine. Meanwhile, emerging markets recorded negative returns for the month. North America led the major developed markets in January due to strong performance in the U.S., which offset a downturn in Canada. The Pacific ex Japan region was the primary market laggard due mainly to weakness in Hong Kong and Singapore. Europe was the top-performing region within emerging markets for the month, led by strength in Greece and Hungary. Conversely, Chinese stocks posted the most notable losses among emerging markets in January.¹ 

Global fixed-income assets, as represented by the Bloomberg Global Aggregate Bond Index, declined 1.4% in January. High-yield bonds saw flat performance for the month, but led the U.S. fixed-income market; corporate bonds and U.S. Treasury securities recorded modest losses.² Treasury yields moved somewhat higher for all maturities greater than one year. Yields on 2-, 3-, 5- and 10-year Treasury notes increased 0.04%, 0.04%, 0.07% and 0.11%, respectively, over the month. The spread between 10- and 2-year notes narrowed from -0.35% to –0.28% in January, and the yield curve remained inverted.³ 

As widely anticipated, the Federal Open Market Committee (FOMC) maintained the federal-funds rate in a range of 5.25% to 5.50% following its meeting on 30-31 January, but cited progress in slowing inflation. In a statement announcing the continuation of the pause in its rate-hiking cycle, the FOMC appeared open to interest-rate cuts later this year, noting that “the risks to achieving [the Fed’s] employment and inflation goals are moving into better balance.” However, the central bank cautioned that rate cuts are not imminent, as it “does not expect it will be appropriate to reduce the target [federal-funds] range until it has gained greater confidence that inflation is moving sustainably toward 2 percent…The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.” 

On the geopolitical front, the U.S. and U.K. (with support from Australia, Bahrain, Canada, and the Netherlands) conducted airstrikes on several targets in Yemen in the early morning of 23 January (local time in Yemen). The military action was in response to Houthi rebel attacks on commercial shipping in the Red Sea off the coast of Yemen. The Houthi movement is an Iran-backed militant group that seized Sanaa, Yemen’s capital, in 2014. The group has attacked U.S. military bases in Iraq and Syria, as well as numerous commercial ships in the Red Sea, forcing international shipping companies to reroute their vessels around the Cape of Good Hope in South Africa, putting upward pressure on freight costs. In late January, an Iran-backed militia group conducted a drone attack at a U.S. military base in Jordan, killing three U.S. troops. President Joe Biden indicated that the U.S. would retaliate for the attack. 

Global commodity prices, as measured by the Bloomberg Commodity Total Return Index, moved modestly higher in January. The West Texas Intermediate and Brent crude oil prices initially spiked in response to the military action in Yemen before retreating, ending the month with gains of 5.9% and 4.6%, respectively. Oil prices also benefited from energy firms’ larger-than-expected draws of crude oil from storage. The New York Mercantile Exchange (NYMEX) natural gas price fell 9.8% in January amid declining demand due to above-average winter temperatures in the U.S. 

The gold spot price fluctuated, falling amid the rise in U.S. Treasury yields (the gold price typically moves inversely to bond yields) for most of the month before rallying during the last week of January in response to relatively strong U.S. economic data and declining Treasury yields. The gold price ended the month with a modest loss of 0.2%. The 5.2% decrease in wheat prices during the month was attributable to relatively weaker demand for exports from the U.S.⁴

¹   All equity market performance statements are based on the MSCI ACWI Index. 

²   According to the Bloomberg US Corporate High Yield Index, the Bloomberg US Corporate Index, and the Bloomberg US Treasury Index. 

³   According to the U.S. Department of the Treasury. 1 February 2024.

⁴   According to market data from The Wall Street Journal.

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