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Market Recap – January 8, 2024

Keel Point

January 8, 2024

The big economic news last week was the December employment report which showed unexpected 216,000 gains in non-farm payrolls and a second consecutive month of 0.4% m/m gains in average hourly earnings.  The S&P 500 was up 0.2% on Friday but closed the week down 1.8%.  The 10-year Treasury rate was back up over 4% on the jobs news. 

  • Even with the cumulative downward revisions of 71,000 in the prior two months, average hourly earnings are up 4.1% over the past year, meaning wages are rising faster than prices. This adds to Fed worries, even as CPI and PCE inflation continues to decline. 
  • The minutes of the mid-December FOMC meeting, also released last week, damped market enthusiasm for Fed rate cuts beginning in March 2024. That meeting was before November PCE core inflation came in at 1.9% annualized for the past six months. Ongoing declines in housing inflation and new signs of slowing wage growth also mean that the Fed is unlikely to raise interest rates further and more likely will start cutting in March or May.
  • December CPI inflation is reported this Thursday, January 11. A drop-back in used vehicle prices should be enough to push core CPI inflation back below 4% in December, for the first time since early 2021. The Fed’s preferred PCE inflation index for December will be released on January 26 before the next FOMC meeting on January 31.

“Soft Landings” are few and far between.  The most recent would be in 1994-1995 when the Fed increased the Fed funds rate from 3.05% to 6.05%. 

  • After the Fed stopped increasing rates in 1995 and made some modest cuts – as markets are expecting in 2024 – the economy and stock market did well in the years that followed.
  • S. GDP growth bottomed at 2.2% in Q4 1995, and the S&P 500 was up 37.2% that year. The S&P went on to achieve gains of 22.68% in 1996, 33.10% in 1997, 28.34% in 1998 and 20.89% in 1999. (Zacks)
  • The 1990s saw the fruits of the internet evolution which had a big impact on business investment and productivity growth. Current business investment and the emerging generative AI contributions to economic and productivity growth may not be the same but are touted as likely catalysts to further growth in both.

2023 Q4 earnings reporting begins this week.  S&P 500 earnings are still expected to grow 12% in 2024. The S&P is trading around 19.2 times these projected earnings compared to the 5-year average of 18.9 (FactSet).


Disclosure:  Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC.  Brokerage and Investment Advisory Services are offered under the Keel Point brand. Investment Advisory Services offered by Keel Point, LLC, an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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