Investment Market update: February 2024

Several economies saw a surprise increase in inflation in December, though broadly it continued to fall. Discover how this affected stock markets in January.

5 min read

Whilst this article focuses in the main on January 2024 market news, there are references to events and market performance from previous months.

Though inflation continues to fall for many major economies, there was a slight increase for some in December. Stock markets saw mixed returns in the first month of 2024, as many central banks dampened hopes of imminent interest rate cuts. Read on to learn more about what happened and what it could mean for your investments.


The US economy began the year on a high, adding a higher-than-expected 353,000 jobs across the month1 . The unemployment rate remained at 3.7% and has now been below 4% for two years1.

Gross Domestic Product (GDP) increased by 3.3% year-on-year in Q4 of 2023, a much faster pace than economists had predicted2 . Additionally, inflation fell; the core measure of personal consumption expenditure rose by 2% for the quarter, and the headline rate was 1.7%2.

The Federal Reserve announced that it would hold interest rates steady at their meeting in January, and dampened market hopes for a rate cut in March3. It explained that inflation is still too high and the path to bringing it down to the 2% target isn’t yet certain; it will need to see more evidence that inflation is sufficiently reduced before it considers any rate cuts3 .

After the so-called “everything rally” at the end of 2023, the S&P 500 continued to perform well in January, achieving several record highs throughout the month4. The Fed’s announcement about interest rates, though, led to a drop for the index. It finished the month with a modest gain of 1.7%5 .


Figures released in January showed that inflation rose unexpectedly in December to 4% as a result of increases to the cost of tobacco and alcohol6 . This cast doubt over the Bank of England’s next move on interest rates. Markets had priced in an expected cut in May, but the inflation figures led some to believe that it may not occur until June6.

Retail sales fell in January and there is little optimism for much improvement in February, causing some concern that the economy may have contracted at the end of 20237 . Other data suggested reasons for optimism, though, as consumer confidence hit a two-year high in January .

Despite this, the surprise rise in inflation meant UK stocks had their worst month since October as markets scaled back their expectations of an imminent rate cut9 . The FTSE 100 dropped by 1.3% over the course of the month, and the FTSE 250 lost 1.7%10 .


The European Central Bank (ECB) held interest rates steady at their January meeting, sharing positive news that inflation is falling in line with the bank’s expectations11 . The ECB said that a small increase to inflation in December for the bloc was expected, and doesn’t suggest any long-term reversal of the current disinflation trend it is seeing11.

Economic activity across the eurozone fell at the slowest pace in six months in January, suggesting that the current downturn is stalling12 . The figures brought business optimism to its highest level in eight months12. Official figures also showed that the eurozone narrowly avoided a technical recession at the end of 2023, as economic growth stagnated in Q4 after falling 0.1% in Q313 .

The pan-European STOXX 600 rose by 1.4% across the month logging its third consecutive month of positive returns14. The MSCI Europe ex-UK Index increased by 2.1%15.


Manufacturing activity in China contracted for the fourth consecutive month in January, extending economic concerns that began in 202316. Official figures showed that GDP grew by 5.2% year-on-year in 2023, slightly higher than expected but still low enough to spook markets17.

China’s CSI 300 fell by 0.91% and the Hang Seng index dropped by 1.78% across the month18. The MSCI Asia ex-Japan Index fell by 5.4%19.

Elsewhere in Asia, the Japan TOPIX was one of the best performing equity markets in the world in January, returning 7.8% for the month19.

What this means for you

The past 12 months have seen many stock markets delivering exceptional results, especially when you compare them to the annual returns of 202220 .

While 2024 has begun with modest returns for many, it’s important to remember that a single month is unlikely to have a long-term effect on your portfolio. As you can see on the graph below, the FTSE 100 has experienced plenty of fluctuations in value over the past two years, but broadly speaking it has grown in value in that time.

Source: London Stock Exchange21

Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this guide was accurate at the time of writing. While information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may affect the accuracy of the guide.

Past performance is not a reliable indicator of future performance. The value of your investment (s) and the income derived from it, can go down as well as up and you may not get back the full amount you invested.


1 02.02.2024 | The US economy added 353,000 jobs in January, starting off 2024 with a bang | CNN
2 25.01.2024 | The U.S. economy grew at blistering 3.3% pace in Q4 while inflation pulled back | CNBC
3 01.02.2024 | January 2024 Fed meeting: Rates hold steady | J P Morgan
4 25.01.2024 | S&P 500 ekes out another record high as Netflix and chipmakers leap | Reuters
5 01.02.2024 | Monthly Market Review | J P Morgan
6 17.01.2024 | UK inflation unexpectedly rises as cost of tobacco and alcohol increases | The Guardian
7 25.01.2024 | UK retail sales dive in January at fastest pace in 3 years: CBI | Reuters
8 26.01.2024 | UK consumer confidence hits highest level in two years | Yahoo Finance 9 31.01.2024 | Energy shares drag FTSE 100 lower; Fed decision in focus | Reuters
10 01.02.2024 | Will it be feast or famine for investors in February 2024? | interactive investor
11 25.01.2024 | European Central Bank holds rates steady, gives no hint at cuts ahead | CNBC
12 24.01.2024 | Eurozone prices rise at increased rate at start of 2024 as downturn moderates | S&P Global
13 30.01.2024 | Europe narrowly avoids a recession |CNN
14 31.01.2024 | European shares see off January muted as falling tech stocks offset healthcare gains | Reuters
15 01.02.2024 | Monthly Market Review | J P Morgan
16 31.01.2024 | China's factory activity shrinks again, weak demand hobbles economy | Reuters
17 17.01.2024 | China confirms GDP rose 5.2% in 2023 on higher government spending | Nikkei Asia
18 31.01.2024 | China stocks tumble to 5-year low after weak manufacturing data; Australia shares hit all-time high | CNBC
19 01.02.2024 | Monthly Market Review | J P Morgan
20 29.12.2023 | Stocks close out 2023 with a 24% gain, buoyed by a resilient economy | CBS News
21 06.02.2024 | FTSE 100 | London Stock Exchange