US equities rise in Q4 2023 despite volatility and economic pressures
US equities made steady gains in the fourth quarter of 2023, despite renewed market volatility. Strong corporate earnings and two Federal Reserve rate cuts helped lift major indices, though economic pressures remained visible in consumer spending and employment figures.
The quarter began with a robust GDP estimate of 4.3% for the third quarter, signalling continued economic strength. However, inflation stayed above the Fed's 2% target at 2.7%, prompting cautious optimism rather than full relief. By the end of the period, the central bank had cut interest rates twice, easing borrowing costs but failing to fully offset concerns over a potential government shutdown.
Equity markets responded positively, with the S&P 500 returning 2.66% and the Russell 2000 gaining 2.19%. AI-driven tech and growth sectors saw the highest volatility, benefiting from strong earnings expectations, while defensive areas like utilities and real estate gained later as rate cuts took effect. Banks, however, faced ongoing pressure.
Consumer spending held up overall but showed cracks among lower-income households. Meanwhile, the labour market weakened, with unemployment climbing to 4.6%—its highest level in four years. Investors continued to favour well-managed companies with solid competitive positions, seeking stability amid shifting conditions.
The quarter closed with equities in positive territory, supported by corporate performance and Fed policy adjustments. Yet challenges persisted, from stubborn inflation to softening job markets. Analysts now watch whether these trends will extend into the new year.
