Market & Portfolio Update - January 2024

As we kick off the new year, markets have carried the positive momentum from 2023 into January 2024.

The latest batch of global economic data showed mixed data prints in January, with bond yields fluctuating as expectations shifted over the month. Markets were pricing in a 50% chance of a March interest rate cut following weak data, including the producer price index. However, strong employment and US GDP numbers continued to reflect a resilient US economy. Markets finally gained some clarity following the FOMC meeting at the end of January, where rates were held steady, and Fed Chair Powell pushed back on a March rate cut and indicated they need to see more evidence of inflation falling to the 2% target level sustainably before considering a cut.

New Zealand markets also saw some volatility following the latest headline inflation figures that were released, coming in at 4.7%, down from 5.6% in the September quarter. One notable point from the report was non tradeables inflation – which covers goods and services that do not face foreign competition and is a better indication of domestic demand and supply affecting consumer prices. This came in at 1.1%, ahead of the Reserve Bank forecast of 0.8% for the quarter, and the market’s reaction implied we might need to see rates higher for longer for a sustained decrease back to the 1-3% target zone. 

Global share market sentiment has also been positive, with markets gaining 4.1% in January. Rothschild and Fisher carried on their stellar 2023 performance, returning 6% and 6.2%, respectively. Rothschild was driven by ASML, the leading manufacturer of chip-making equipment, after it returned 19% in January. Fisher’s best-performing stock was Nvidia, which soared 27% in January. Our in-house tactical allocations to the US Communications and Technology sectors also added value, as these sectors were up 7.2% and 5.5% for the month. 

January not only brought sunshine for Kiwis but also the latest round of global companies' earnings. Some notable mentions from reports were that Netflix had 13.1 million net subscribers for the quarter (4 million ahead of forecasts). Novo Nordisk forecasted strong growth in 2024, led by its diabetes and weight loss drug treatments. After an impressive update, Microsoft reported $62 billion in quarterly revenue, with Azure Cloud growth 30% year on year. ASML saw a 30% increase in yearly revenue and orders jump for its Lithography systems, forecasting strong demand for artificial intelligence chips.