After its strong finish to 2023, the stock market could be excused for taking a breather at the start of this year. But after laying low for a couple of weeks, stocks resumed their upward trajectory to finish the month strong. During the last week of January, the S&P 500 Index and Dow Jones Industrial Average each hit a new all-time high.

In spite of the stock market’s continuing strength, Wall Street is contending with the sobering reality that the Fed may not start cutting interest rates as soon as it would like. In January, we learned the economy is growing faster than expected, inflation appears to be leveling off, and the jobs market remains strong. Those are not the ingredients for a persuasive argument to stimulate the economy by reducing interest rates.

The good news is an interest rate cut may not be necessary to keep the economy growing. Thus far, producers and consumers have adapted to higher interest rates without a drop in productivity or consumption. It remains to be seen if that continues throughout the first quarter of this year, which is why the Fed may wait until it sees that data before adjusting its monetary policy.

In the meantime, we will see the 2023 fourth quarter and full-year results for corporate America, along with their guidance for this year. In January, most of those numbers came in close to what Wall Street expected. Nevertheless, it is the performance of the big tech companies that are getting most of the attention since they exert outsized influence on the major stock market indexes.

Despite the strong performance by tech stocks, the NASDAQ Composite Index did not surpass its all-time high set during November 2021 while the coronavirus pandemic upended the global economy.

Nevertheless, the mega-cap tech companies that dominate the major stock market are the driving force behind its recent surge. Some of that is due to optimism over the potential for artificial intelligence, but some of it may be a defensive measure as I discuss on the following page.