Monthly Market Report: January 2024

Markets Start Year on Positive Note

Prepared by Brandon Yee, CFA, CAIA, and Thomas Connelly, CFA, CFP


Developed Markets Rise

In the month of January, international developed stock markets returned 0.43%. Japan and the U.S. recorded returns of 4.62% and 1.53%, respectively. The U.K. and Pacific ex Japan lagged other markets for the month. International developed markets are up 9.48% over the past year. The U.S. economy continued to be resilient in January with a rebound in travel, tourism, and other consumer discretionary spending. Increasing manufacturing investments is also helping boost the economy.


Emerging Markets Drop in January

Broader emerging markets posted a -3.55% return for the month. India and Mexico recorded returns of 2.41% and -1.86%, respectively. Other than the Indian market, most Asian markets posted negative returns, with China, Hong Kong and Korea lagged other markets for the month. Emerging markets are down -2.06% over the past year. India’s economy continues to experience robust activity. China’s economy continues to be weighed down by weaker corporate capital expenditures and a shaky real estate sector. Near historic low valuations relative to the U.S. and international markets may help emerging market investors going forward.


Information Technology and Telecommunications Outperform

Global information technology and telecommunications sectors recorded returns of 3.53% and 3.43%, respectively, in January. Materials and utilities lagged other sectors this month. Although the energy and materials sectors underperformed over the past year, as opposed to 2022, their medium-term fundamentals look attractive. Recessionary concerns are a short-term headwind.


Value Stocks Underperform

In January, value underperformed growth in the large-cap space and the small-cap space. Momentum recorded a return of 3.49%. Value stocks across the world continue to trade at large discounts relative to growth stocks. Forward earnings assumptions may be too optimistic for growth companies, particularly those in the information technology sector.


Value Mixed in International Markets

In the international developed markets, value underperformed growth in the large-cap space but outperformed in the small-cap space for the month. Momentum recorded a return of 3.91% while small-cap emerging market stocks posted a return of -3.22%. Value stock valuations are still very low relative to growth stocks in both international developed and emerging markets, which is consistent with the US market.


Savers Benefitting from Higher Interest Rates

In January, the three-month Treasury bill index returned 0.43%. From the beginning of 2022 through the end of January 2024, the annualized interest rate on the 90-day Treasury bill increased from 0.08% to 5.42%. Savers and retirees are now getting paid much more interest. Real interest rates are positive with the CPI increasing by 3.30% over the past year through the end of December.


Long-Duration Fixed Income Investments Underperform

The returns of deflationary hedges were mostly negative for the month. The Bloomberg Barclays U.S. Agg Bond Index returned -0.27% for the month. Long-term government bonds and long-term municipal bonds recorded returns of -2.19% and -0.89%, respectively, as interest rates increased. Catastrophe bonds continued their strong performance, returning 1.83% in January. Insurance-linked securities like catastrophe bonds are benefiting from higher premiums that insurance companies are demanding from buyers.


WTI Crude Oil Rebounds

Inflation-sensitive investment returns were mixed for the month. WTI crude oil and MLPs were up 6.09% and 4.10%, respectively, in January. International real estate and U.S. natural gas were down for the month. The Bloomberg Commodity index posted a return of 0.40%. Gold bullion was down in January as interest rates and the US dollar rose. As geopolitical risks increase and become more interconnected, gold bullion may serve as a safe haven. Emerging market central banks have been steady buyers of gold bullion in recent years.


U.S. Dollar Weakens Versus Other Currencies

Over the past three months, the U.S. dollar depreciated against most other major currencies. Over the past year, the U.S. dollar strengthened against the Japanese Yen, Indian Rupee, and Chinese Yuan. The continuation of U.S. fiscal and trade deficits may weigh on the U.S. dollar in the medium-term to long-term. Gross federal debt to GDP stands at 120% and is forecasted to increase throughout the decade. In addition, the fiscal deficit is 6.19% of GDP at a time of economic expansion and low unemployment.

Brandon Yee, CFA, CAIA – Senior Research Analyst

Brandon conducts investment due diligence for Versant Capital Management, and designs and implements tools and processes to support the firm’s research. His background in biology and finance help him to look at challenges from multiple angles, resulting in unique and well-rounded approaches and solutions.


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Versant Capital Management, Inc.), or any non-investment related content, made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Versant Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Versant Capital Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the article content should be construed as legal or accounting advice. If you are a Versant Capital Management, Inc. client, please remember to contact Versant Capital Management, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Versant Capital Management, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.