January's Volatile Markets - Inflation, Weather and Earnings

The first few trading weeks of the year were much different than the ending of 2023.

As traders tried to position themselves in 2024 there were many new factors to consider. Would inflation take control of the markets in Q1? The US had inflation pick up in December and we saw the same in Europe.

What a difference a month makes… Investors lost some confidence in the equities the first few weeks of the new year. The data and core factors were the same but the tone and feel of the market appeared worrisome.  The commentary on the markets to start 2024 had been focused on the possibility of fewer rate cuts in '24 - which would be negative for the market and explains the volatility to start the new year. 

Now traders have digested the first few trading weeks and are back to where we started. Investors appear interested in buying dips and see pullback in prices as opportunities to add to bullish positions.

Weather premium has been a factor in many commodities and that will only pickup in the coming months. The soft markets have had some stories to watch. Will cocoa continue to strive towards new highs as 2023 provided it plenty of steam...if production comes in lower and there are any disruptions for import/exports the answer will most likely be yes. Will orange juice prices see another move higher and be an underdog overachiever in 2024? Orange juice will be an interesting commodity to watch. Florida has had interesting weather and major storms affected production. The main growing region of the soft also has a changing climate and weather patterns have been less predictable. We see colder winters and hotter stretches in the summer which have made Florida oranges less appealing. California has begun to be seen as a bigger player in oranges. As the world's climate changes, commodities have been able to thrive in certain regions and have been hurt in others that were once seen as key areas.

Equities went from weak, to new all time highs this month. Trader's appeared to buy the dip and positioned themselves ahead of big earnings data and other news affecting stocks in the major indexes. Apple had their own issues with legal battles, will their watch sales need to be halted? Will changes need to be made? What effect will this have on Apple shares long-term? Through the news, Apple has been able to stay consistent. Tesla's earning came in well below the expected causing a quick sell-off in the stock. Some see this as an opportunity to add to existing positions. Elon Musk appears to positioning Tesla as not just an electric car company but a player in the AI space. Speaking of AI, Nvidia Corp continues to trade above $600. Many investors have began to put money in this stock as analyst back the company and its future. Once the stock hit $500, it hasn't really looked back. Technically, $600 was a big level of resistance and I think this will be a key level to hold above.

We'll see where the markets end the week as we head into the last trading days of January and prepare for February. I'm anticipating a strong end to the month and that the Jobs Report the first Friday of the month will guide the markets from there.

Disclaimer: Past performance is not indicative of future returns. Opinions are my own. Profitable trades are not guaranteed.