Welcome to my video presentation for Monday, January 8. I re-cap last’s week action on Wall Street, with a look at the week ahead. Below is a condensed transcript. For additional details and several charts, watch my video.

Stocks fell and interest rates inched higher last week, snapping the S&P 500’s nine-week winning streak. After the powerful rally for equities over the last few months, it’s not surprising to see markets take a breather. Stocks had, so to speak, gotten ahead of their skis.

It remains likely that the Federal Reserve will start cutting interest rates during the first half of 2024, but it’s far from certain. As 2024 gets underway, brace yourself for volatility. Each new economic report has the power to alter rate expectations and hence move markets. That said, my outlook for stocks and bonds this year remains positive.

The economic news has been good…perhaps too good. U.S. and international stocks began the first week of 2024 by posting losses, as hot economic data cast doubt on the timing of the Federal Reserve’s interest rate cuts.

Wall Street is often a perverse place, where good news on the economy can actually be bad news for investors. The employment report for December showed an expectedly strong labor market.

The U.S. Bureau of Labor Statistics reported last Friday that employers in December added 216,000 jobs for the month while the unemployment rate held at 3.7%. Those numbers compared with respective estimates of 170,000 and 3.8% (see my video for charts).

The BLS report also showed that average hourly earnings rose 0.4% on the month and were up 4.1% from a year ago, both higher than the respective estimates of 0.3% and 3.9%. Average hourly pay has outpaced inflation over the past year, giving Americans more money to spend.

Renewed fears of inflation are a headwind for stocks. The major indices posted the following losses for the holiday-shortened week: The Dow Jones Industrial Average -0.6%; the S&P 500 -1.5%; the tech-heavy NASDAQ -3.2%; and the MSCI EAFE -1.5%. Economic optimism pushed up the price of crude oil by 3.2%. The benchmark 10-year U.S. Treasury yield (TNX) rose 0.2% to settle at 4.04%.

As of market close January 5, the TNX had broken above its 200-day moving average, a negative sign. However, other technical indicators are more sanguine.

The benchmark SPDR S&P 500 ETF Trust (SPY) has edged lower but it still hovers above its 50- and 200-day moving averages. If it falls below any one of those thresholds, stocks are in trouble.

The CBOE Volatility Index (VIX), aka the “fear index,” hovers at around 13.3, well beneath its pivotal threshold of 20. A reading of the VIX above 20 indicates that the markets during the next 30 days will experience markedly higher volatility; the converse it true. A falling VIX indicates less fear and stress in the markets.

Rate cuts are coming this year; the question is timing. Stocks tend to perform well in the period leading up to the initial rate cut. Performance was more mixed in the following months, but in the instances when a recession didn’t occur (1995, 1998, and 2019), the stock market continued to rise.

The upshot: Don’t be disheartened by a disappointing week. Economic growth is strong, but not too strong, and the Fed’s tightening cycle has ended. We have a long year ahead of us and several bullish factors remain in place.

The week ahead…

Watch the following economic reports, scheduled for release this week: consumer credit (Monday); trade deficit (Tuesday); wholesale inventories (Wednesday); initial jobless claims, consumer price index (Thursday); producer price index (Friday).

The most important data will be the CPI and PPI. If inflation readings at the consumer and producer levels come in hotter than expected and push up bond yields, the equity markets could enter a rough patch.

Want an early look at the best investment opportunities of 2024? With over 136,000 followers and one of the strongest research teams in the business, independent financial research outfit StreetAuthority is once again going out on a limb with a series of startling new forecasts for the year ahead.

StreetAuthority (a subsidiary of Investing Daily) has just come out with a new report: “9 Shocking Investment Predictions for 2024.” Click here for your copy.

John Persinos is the editorial director of Investing Daily.

To subscribe to John’s video channel, click this icon:

This article originally appeared on Investing Daily.