Market Review – January 2024


A subdued end to the year: although UK equity markets ended December – and 2023 – in positive territory, their performance compared to most major overseas markets was relatively muted overall. The FTSE 100 Index rose by 3.7% during December and by 3.8% over the year; meanwhile, the FTSE 250 Index climbed by 8% over December and by 4.4% over 2023. Having risen as high as 4.75% during 2023, the yield on the benchmark UK gilt ended 2023 at 3.54%, dampened by expectations of lower interest rates. The pound strengthened during 2023 against the US dollar, rising from 1.21 to 1.27.

Interest rates unchanged: the Bank of England (BoE) held its key interest rate at 5.25% and policymakers gave no indication that rate cuts are in the offing. Nobody voted for a cut; six members of the Monetary Policy Committee voted to hold rates, and three voted for an increase of 25 basis points. Nevertheless, although BoE Governor Andrew Bailey emphasised that interest rates are not set to fall until inflation has returned to its 2% target, speculation over the possibility of rate cuts during 2024 appears to have risen, intensified by lacklustre economic data and signs of a slowdown in wage growth.

Recession fears on the rise: although initial estimates suggested that the UK economy had stagnated between July and September, updated calculations released during December showed that the economy had shrunk by 0.1% during the third quarter. The news raised concerns over the possibility of recession that were exacerbated by a month-on-month economic contraction of 0.3% in October.

Inflationary pressures continue to ease lower prices for transport, recreation, and food curbed consumer price inflation, which fell from 4.6% year on year in October to 3.9% in November, fuelling hopes that central bank officials could decide to bring down interest rates earlier than expected. UK job vacancies continued to fall during the three months to October, and growth in average earnings (excluding bonuses) slowed to a rate of 7.3%.

Consumer confidence ticks up: confidence amongst UK consumers showed signs of a “modest improvement” in December, according to GfK’s Consumer Confidence Index, although sentiment remained negative overall. In comparison, Lloyds Bank reported that business confidence in the UK fell to a five-month low during December, posting its biggest one-month decline since August 2022 and reflecting caution towards wider economic prospects.



A strong end to the year: many – but not all – leading equity markets ended 2023 strongly, posting double-digit gains over the calendar year. In the US, the S&P 500 Index rose by 24.2% over 2023, but it is worth noting that the ‘Magnificent Seven’ (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla) accounted for more than 60% of that return. The Dow Jones Industrial Average Index rose by 13.7% over 2023 and by 4.8% in December, hitting a new closing high during the month. Elsewhere, having ended 2022 at 3.88%, the yield on the ten-year Treasury Bond also ended 2023 at 3.88%, but rose as high as 4.98% during the year.

Inflationary pressures on the wane: the rate of US consumer price inflation eased from 3.2% to 3.1% year on year during November, dampened by lower fuel prices. The US Federal Reserve (Fed) maintained its key federal funds rate at a range of 5.25% to 5.5% during the month. Updated forecasts suggest that Fed officials expect rates to fall below 5% in 2024. Nevertheless, Fed Chair Jerome Powell warned: “It is far too early to declare victory.”

Risks tilted to the downside: the European Central Bank (ECB) held its key interest rate at 4% and advised that inflationary pressures – which have eased over recent months – are likely to increase in the short term before the rate of inflation finally returns to its 2% target in 2025. The ECB still believes economic risks for the region are tilted to the downside. Against a weak economic backdrop, business sentiment deteriorated in Germany during December. The Dax Index rose by 3.3% during December and by 20.3% over the year.

China under pressure: credit ratings agency Moody’s downgraded its outlook for China’s credit rating from “stable” to “negative”, citing the deteriorating economic outlook, a slowing property market, and the likelihood that financially stressed local governments and state enterprises will require government support. The Shanghai Composite Index fell by 1.8% in December and declined by 3.7% over 2023.

Politics and geopolitics: more than 40 countries will head to the polls in 2024 according to Bloomberg, including the US, India, Russia, Taiwan, Indonesia, and probably also the UK. Meanwhile, the International Monetary Fund warned that the global economy faces a turning point as deepening geoeconomic fragmentation risks pushing the world towards “Cold War Two”.

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