Record Highs for S&P 500 Spotlight January Market Activity

A period of market volatility and consolidation is likely as markets have already priced in much of the economy's good news.

The report card is in. Despite high interest rates, elevated inflation and a challenging market environment, U.S. gross domestic product grew a strong 3.1% in 2023. And in the month since, consumer spending has continued to be robust, unemployment has remained low and the S&P 500 recorded new highs.

Some took this as bad news. Supported by this resilient economy, the Federal Reserve (Fed) elected to hold interest rates steady at the first Federal Open Market Committee meeting of the year on January 31.

"January was déjà vu, continuing the narrative of late last year with economic resilience, moderating inflation, expectations that the Fed will soon cut interest rates and a mega-cap Tech-led equity rally,” said Raymond James Chief Investment Officer Larry Adam.

“However, with the S&P 500 rallying about 20% from the late-October lows, a period of volatility and consolidation is likely as the market has priced in elevated economic and equity market expectations. Much of the good news has already been priced in.”

We’ll dig into more details below, but first, let’s look at where we stand one month into 2024.

Performance reflects index values as of market close on January 31, 2024. Bloomberg Aggregate Bond and MSCI EAFE figures reflect January 30, 2024, closing values.