Burnham Market Insights – January 2024
January 31, 2024

Market review

A surprise dovish shift in Fed temperament led to a Bullcember to Remember and a dramatic unwind of the crowded ‘higher for longer’ trade. The Fed left rates unchanged at its December meeting but revealed a distinct sense of accomplishment in its fight against inflation, likely signaling the end of its intense two-year tightening campaign. Stocks and bonds rallied, with rates falling across the US treasury curve and futures markets pricing in the potential for five to six 0.25% rate cuts in 2024. Leadership within stocks began to meaningfully broaden beyond A.I.-fueled megacaps, with many year-to-date losers (like small caps) sharply outperforming. Regionally, international developed and emerging market stocks also rallied but lagged the US, as European central banks reinforced hawkish policy stances and a sluggish Chinese economy continued to absorb geopolitical, real estate, and policy uncertainties.


Market performance: December 2023

On… cash on the sidelines:

“Cash yields above 5% motivated investors to move money from volatile bonds and bank accounts to money market funds in records numbers in 2023. Money market fund assets (dry powder) now sit at $6 trillion dollars¹.” – Michael Gates, Managing Director, BlackRock

Asset class views

Source: BlackRock as of 12/31/2023, Views are subject to change

We move further overweight U.S. stocks, “buying the dip” on technology and large cap growth companies with strong, quality businesses and robust earnings. We are overweight U.S. treasuries with a barbell preference for short-(floating rate) and long-duration nominals for diversification purposes.

We maintain near benchmark-weight in emerging market bonds in fixed income-heavy models due to attractive yields and potential softening dollar strength. We compartmentalize our growth and value factor bets within regions as rate, inflation, and recession outlooks diverge, with continued broad preferences for growth and quality factor exposures. We express a slight preference for US high yield bonds, with a targeted tilt toward higher quality and undervalued issues.

We are underweight international developed market equities due to weakening corporate earnings signals and more pronounced downside vulnerability to potential rising energy prices and geopolitical turmoil. We remain cautious on emerging market stocks but increase exposure to countries with the most attractive growth prospects (like Taiwan) while also seeking to limit exposure to the litany of mounting headwinds in China. We hold close to benchmark exposure to investment grade credit and mortgage-backed securities, increasing exposure to credit risk in bond-heavy portfolios for potential upside.


This information is provided for illustrative and educational purposes only. This information does not constitute research, personalized investment advice, or a fiduciary investment recommendation from BlackRock to any client of a third party financial professional, and is intended for use only by such financial professional, in consultation with their client and with other information, as a resource to help build a portfolio or as an input in the development of investment advice for its own clients. Such financial professionals are responsible for making their own independent judgment as to how to use this information. BlackRock does not have investment discretion over, or place trade orders for, any portfolios or accounts derived from this information. Holdings, performance, and other characteristics of any portfolios or accounts derived from this information may vary materially from the information shown herein. Please review the Market Insights Disclosure here for more information.

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