Market Reviews 2019

Market Reviews 2019 2019-02-08T17:08:10+00:00

US stocks staged a startling recovery in January, recouping nearly all the ground they had given up in December. The reversal was particularly notable because many of the issues that had plagued investors during the final quarter of 2018 continued to trouble them in January 2019. The government shutdown, which had begun in December, dragged on through most of the month, and the compromise that ended it merely amounted to a three-week cease-fire. No definitive news emerged concerning trade with China. Federal Reserve officials did strike a more dovish tone during January, but even that change could have been a response to weakening economic conditions. The sharpness of the rally may have been due, in part, to the turn of the calendar itself — technical factors like tax-loss harvesting and hedge fund redemptions would have required selling in December, but not in January. In any event, the S&P 500 returned a stunning +8.01% for the month. Smaller stocks performed even better: the Mid-cap 400 index returned +10.46%, and the Small-cap 600 index rose +10.64%. [Index returns: Standard and Poors]

January’s rally extended overseas as well, in spite of signs of slowing in a number of economies around the world and uncertainty over the path of the UK’s exit from the European Union and the political fate of UK Prime Minister Theresa May. The MSCI EAFE international equity index returned +5.46% in local currencies for the month. Possibly because of dovish rhetoric on the part of the Fed, the US dollar weakened a bit. It ended January at 108.84 yen, down from 109.7 a month earlier. It also slipped to $1.3135 against the pound Sterling, from $1.2763 at the end of December. The dollar was steady against the euro, ending little changed at $1.1454 against that currency. The dollar’s softness benefited US investors already holding overseas assets, and EAFE returned +6.57% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

The Fed’s more accommodative statements pushed interest rates a little lower. The yield on the two-year US Treasury fell to 2.45%, from 2.48% at the end of December. The ten-year yield ended January at 2.63%, from 2.69% a month earlier. As a result, the Bloomberg Barclays US Aggregate Bond Index returned +1.06% for the month. [Index returns: Bloomberg; Treasury yields: US Treasury]