January 2024 barometer update
The market is confident that the Federal Reserve will engineer a soft landing. This has resulted in a Santa Claus Rally. The US indices are all bullish while the FTSE 100 is neutral positive.
The Sector Rotation Clock is pointing to Early Expansion in the stock market cycle. Technology and Consumer Discretionary top sectors confirm this by being bullish. To reiterate, the cycle is as follows:
| Market Phase | High performing Sectors |
| Early Expansion | Technology, Consumer Discretionary |
| Middle Expansion | Telecommunications, Industrials |
| Late Expansion | Materials, Energy |
| Early Contraction | Consumer Staples, Healthcare, Utilities |
| Late Contraction | Financials, Real Estate |
As I did last month, I have examined each sector in the Investment Barometer to see whether it is bullish or bearish. I have coloured these sectors green or red accordingly. I have updated the Sector Rotation Cycle Clock to illustrate this.
The dial has wound round slightly towards the edge of Early Expansion. The top sectors which benefit from this stock market phase are Technology and Consumer Discretionary.
According to the Barometer the Consumer Discretionary sectors that are worth examining now are Household Goods, General Retailers and Media. I shall keep an eye on these as we move through the cycle.
To summarise the indicators:
The Barometer has risen to +2. This is the result of many sectors turning bullish.
The Hi-Lo-Grometer has moved into the light green zone (i.e. we are safe to buy stocks).
The US Treasury Yield indicator has dropped further to below -150 points which makes this reading anomalous when viewed against the others.
By January the stock markets will become over-bought and may need to consolidate before moving upwards once again. Keep an eye on the Consumer Discretionary sectors I mentioned above and wait for the market to pull back slightly.
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