The S&P/ASX 200 Index (ASX: XJO) finished 2023 up a very solid 9.3%.
If we add in the dividends from those companies that pay out a slice of their profits to shareholders, that gain comes out to around 13.9%.
And the ASX 200 kicked off 2024 on another positive note, closing up 0.5% on Tuesday at 7,627.8 points.
That's about as close as you can get to the record closing high of 7,628.9 reached 13 August 2021 without setting a new all-time high.
But yesterday we saw the benchmark index catch some headwinds, ending the day down 1.4%.
And in morning trade today, the ASX 200 is down 0.5% at 7,486.90 points.
That's still only 1.9% off the record highs. But why has the rally stalled?
What's happening with the ASX 200 bull run?
Some of the past two days of losses are likely due to start of the year profit-taking. Something I'd expect to see after the 12.6% gains posted by the ASX 200 in the two months from 30 October.
But as we often see with broader market moves on the ASX 200, many of the impacting forces (whether higher or lower) come from developments in the United States.
In this case, those developments surround the evolving outlook for interest rate cuts from the US Federal Reserve. While consensus expectations still see the Fed cutting rates in 2024, an increasing number of investors now don't expect those cuts to arrive until later in the year.
The potential of higher rates for longer in the world's top economy has pressured US stocks in the new year, with the S&P 500 (INDEXSP: .INX) closing down 0.8% overnight after sliding 0.6% on Tuesday.
In the Fed minutes from last month's meeting, released yesterday in the US, the FOMC members mostly agreed that an improving inflation outlook could lead to them lowering rates "by the end of 2024".
However, that's a fair bit longer than the Fed's upcoming March meeting, when many pundits had been pencilling in the first rate cut. And the ASX 200 has been catching many of the same headwinds as US equities on this changing outlook.
Commenting on the outlook for interest rate cuts from the Fed, Morgan Stanley chief US economist Ellen Zentner said (quoted by Bloomberg), "The FOMC minutes focused on better-balanced risks to growth and inflation, but policy will remain restrictive for some time."
Zentner added, "We do not think this is a Fed planning to lower interest rates anytime soon."
With an eye on falling US equities and, by connection, the pressure on the ASX 200, Louis Navellier, chairman of Navellier & Associates, said:
The year is certainly off to a rough start, which may motivate more profit taking, after the outsized gains of last year, but the fundamentals haven't changed, nor have earnings estimates.
Indeed, the kind of market retrace we're seeing on the ASX 200 alongside the S&P 500 could provide some opportune long-term entry points.
According to Navellier, "There are opportunities in good stocks with attractive values being dragged down for no good reason."
