US and European Markets Start 2024 on a Cautious Note
US and European equity markets have begun the new year on a cautious note, with both pulling back slightly from their record high closes in 2023. The S&P 500 and Stoxx Europe 600 have both seen marginal declines, while yields on 10-year US bonds and German bunds have started to creep up. The energy sector has shown early signs of strength, with the benchmark Energy Select Sector Fund (XLE) up 2.1% in the first two trading days of the year.
Growing tensions in the Middle East have added to market uncertainty, as an Iranian warship entered the Red Sea, raising fears of potential oil supply disruptions. The Federal Reserve’s stance on interest rates has also contributed to market jitters, with speculation about the timing and extent of rate cuts. Principal Financial Group predicts that 2024 will be the “year of the pivot,” with markets poised for further gains.
The American Association of Individual Investors has reported a shift towards a more bullish sentiment, with a majority of investors now holding a positive outlook for the market. This is a significant change from just two months ago, when the majority of investors were bearish. Historical precedent also suggests that the bulls may have the upper hand, with the S&P 500 Index closing above its 200-day moving average for the first time since December 2022.
While the markets have started the year on a cautious note, there are signs of optimism and potential for further gains.
