US Macroeconomic Report - January 2024

Equity markets gained in January, with the S&P 500 rising 2.7%, supported by strong earnings and a resilient labour market as U.S. unemployment fell to 4.1%. Long-term interest rates rose by 22bps, while short-term rates remained stable amid core inflation easing to 2.79% YoY and no cut by the FED. However, GDP growth disappointed, slowing to 2.48% YoY, raising concerns about economic momentum despite moderating inflation.

Indicator Analysis:

Our U.S. economic cycle composite indicator remains practically unchanged, however, given its current momentum, we believe it still indicating conditions characteristic of an economic cycle peak deceleration.

Our economic cycle analysis indicates a mixed outlook, with 43% of indicators signalling a cycle top, 0% indicating a cycle bottom, and 57% remaining neutral.

Month-over-month, economic growth saw the largest gain (+1.16%), while household conditions declined the most (-3.58%).

Year-over-year, sentiment showed the strongest improvement (+10.17%), whereas the labour market weakened significantly (-7.81%). However, this deterioration stems from previously very high levels, suggesting a normalization rather than a fundamental weakening.

Conclusion:

Growth has already surprised to the downside, yet markets remain overly optimistic about its trajectory. The labour market has been in free fall from its 2022 peak, and while this cooling is expected to ease inflation, it also raises concerns about slowing economic activity. A further deterioration in labour conditions could weigh on growth, leading to equity multiple compression and an eventual market correction as expectations adjust.

Read the Full Report:

The full report is available for download at the bottom of this page. Inside, you’ll find a comprehensive breakdown of each component contributing to our macroeconomic indicators, providing detailed insights into the factors driving current economic conditions.