Following the rally in the final quarter of 2023 when expectations of imminent interest rate cuts boosted equities and bonds, performance was mixed in January 2024 as markets adjusted the magnitude of interest rate cuts priced in for 2024. The US dollar appreciated versus major currencies and crude oil prices rose with the potential for supply disruption from rising geopolitical tensions. Japanese, European and US equities were the strongest performing developed markets in January while the UK and notably China declined. Property and small cap stocks which are sensitive to interest rates struggled as yields rose.

In fixed income markets, global government bonds reversed some of last year’s gains in January this year as markets adjusted to the interest rate outlook and UK government bonds (gilts) lagged. Global investment grade credit posted negative returns in January despite spreads tightening. The European high yield bond market posted positive returns while its US counterpart delivered flat returns over the month. A stronger US dollar was a headwind for emerging market debt.

The US economy remains resilient with firm wage growth and steady unemployment while GDP growth for the fourth quarter was significantly above expectations. US inflation increased in the 12 months to December 2023 due to higher housing and energy costs, with some sectors in the US struggling due to weak demand. The US equity market reached a record high in early January as optimism around a ‘soft landing’ scenario continued the rally in the ‘Magnificent Seven’ stocks, namely Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla. Among the technology companies which recently reported earnings, Microsoft shares were impacted by weak guidance for the coming quarter and Google-owner Alphabet disappointed while Amazon shares moved higher on the back of strong results along with Facebook-owner Meta Platforms which announced its first-ever dividend. Tesla shares fell sharply in January as sales growth may be notably lower this year. The Federal Reserve Bank left interest rates unchanged at a range of 5.25% to 5.50% at its policy meeting on 31 January 2024 and indicated that an interest rate cut in March is unlikely, which proved less positive for fixed income assets and US equities lost momentum.

UK equities fell slightly in January. While there have been signs of improved growth momentum and consumer confidence, retail sales declined sharply which sparked some concerns of an impending slowdown. The Bank of England forecast that inflation could ease to its 2% target within a few months as it held borrowing costs at 5.25% for the fourth time in a row.

Europe delivered positive returns in January. Inflation across the eurozone has eased but has proved stickier than expected, interest rates were kept on hold in January. The eurozone may have already fallen into a technical recession with its largest economy, Germany, contracting in 2023 due to persistent inflation, high energy prices and weak foreign demand but it avoided a recession at the end of the year. Europe is likely to face the biggest challenges concerning restricted oil supplies following the threats to shipping in the Red Sea.

Emerging market equities were impacted by the strong US dollar in January. China was the worst-performing market in Asia as the country continues to deal with deflation, weak consumer confidence and a housing market collapse with Chinese property developer Evergrande, finally going into liquidation. Although the People’s Bank of China announced several stimulus measures, it was not what markets were hoping for to re-ignite activity. Ongoing concerns around the economic outlook for China likely contributed to the weak performance of Asian (ex-Japan) and emerging market equity indices. While China’s growth has stalled, Indian equities have rallied, aided by a growing investor base and strong corporate earnings.

Easing inflation and lower interest rates should reduce the headwinds that have faced both equities and bonds in recent years, and resilient economic growth may further boost the performance of equities. While bonds should benefit if interest rates fall ahead of expected interest rate cuts, with the US Fed forecasting three interest rate cuts in 2024, the attractiveness of cash may fade as it delivers a lower yield.


Market Performance 2024 Year to Date
FTSE All-Share -1.32%
FTSE World ex-UK +1.11%
FTSE Actuaries UK Conventional Gilts All Stocks -2.20%
FTSE Actuaries UK Index-Linked All Stocks -4.49%


Total returns in GBP to 31/01/2024


Key Rates  
Bank of England Base Rate 5.25%
Inflation (Retail Price Index/Consumer Price Index)* 5.20%/4.00%


*December 2023

Source of data: FE Analytics,,

The content contained in this article represents the opinions of MacIntosh & James Partners Ltd. The commentary in no way constitutes a solicitation of investment advice and should not be relied upon in making investment decisions. Past performance is not a reliable indicator of future results. The value of your investments can fall as well as rise and are not guaranteed.