Following the broad-based Q4 stock rally, investors entered 2024 with both hope and caution. Trading was choppy, but by the end of January, the S&P 500 Index notched several new highs and a third consecutive monthly gain. For the first month of the year, at least, confidence in the strength of the U.S. economy outweighed concerns about monetary policy. Whether that confidence will remain intact is uncertain.

Perhaps the most predictable thing about 2023 was that most market predictions would be wrong. Many pundits foresaw a recession, a stalled economy, stubbornly high inflation, job layoffs and more. Instead, the U.S. economy proved to be remarkably resilient, rewarding investors with a stunning stock rally in the final two months of the year. Markets were lifted by a raft of good news, including inflation falling faster than expected, strong U.S. economic output, and a healthy labor market. Driving the year-end surge was the belief that central banks are done with interest rate hikes and will soon begin rate cuts. How that story unfolds remains to be seen.