Market Pulse: December 2023

December 2023 marked a strong year-end rally for stocks, given several key factors:

Market Movers:

Cooling Inflation:** Inflationary pressures continued to ease in December, bolstered by less robust employment demand, normalising supply chains, and growing optimism that central banks would slow down the pace of interest rate hikes.

Central Bank Policy Shift:** The Federal Reserve took a more dovish tone compared to its European counterparts.


Performance Highlights

Overall Markets tracked higher: Major indices closed the month positive. The Dow Jones Industrial Average gained 4.93%, the S&P 500 advanced 4.5%, and the Nasdaq Composite jumped 5.6%.

Sector Performance:** Real Estate (+8.8%) led the pack, followed by Industrials (+7.1%) and Consumer Discretionary (+6.1%). Energy remained the laggard due to softer prices in crude.

Small-Caps Outperform:** Small-cap stocks, represented by the Russell 2000, surged an impressive 12.2% in December, reflecting broader market optimism.


Other Asset Classes

Bond Markets: Treasury yields were impacted by investors taking a much more bullish stance. The yield on the benchmark 10-year U.S. Treasury note finished the year near where it started.

Currency Markets: The U.S. Dollar weakened slightly against major currencies as the Fed's dovish stance dampened demand for safe-haven assets.

Commodities: The Bloomberg Commodity Index dipped 2.69% in December, capping a year of losses for the sector. Crude oil prices continued their downward trend due to global economic slowdown concerns.


Overall

December 2023 witnessed a positive shift in investor sentiment driven by hopes of cooling inflation and a dovish turn from central banks. Markets ended the year on a high note, with most sectors registering gains.

Heading into the New Year, the US Dollar Index finds itself at interesting inflection point. Whilst in the short term, it is a touch oversold, sentiment and positioning have pulled back from the bullish consensus. Longer term though, the Greenback may be due for a larger correction – as the US led the charge in putting up rates, most central banks have caught up. Should the US be quicker to cut than others too, we would likely see continued directional weakness in the US Dollar.

General disclosure:This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Aria Capital Management or any of its related companies to participate in any of the transactions mentioned herein. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks. Past performance does not guarantee future results. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

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