Commentary
Equity markets started 2024 with losses, with small-caps being the weakest performing class, followed by tech-focused companies (Russell 2000 and Nasdaq 100 lost 3.7% w/w and 3.1% w/w, respectively). Meanwhile, yields increased in fixed income markets after declining gradually for the past 3 months (the 10-year US treasury and German bund are offering 4.05% and 2.14%, respectively).
Last week’s market dynamics can be in large part explained by the US labor market news. As non-farm payrolls exceeded expectation by notable margin, markets started pricing in a more hawkish monetary policy for 2024, which reduces stock prices and increases fixed income yields. As of now, the market-implied probability that the Fed rate will fall to 4.00-4.25% or below stands at roughly 83%.
