Monthly Market Monitor - January 2015 Recap
U.S. equities tumbled in January with all three major indices suffering their worst monthly declines since January of last year. Following a 13.7% 2014 return, the S&P 500 fell 3% last month, whereas a year ago in January the index fell 3.5%. Investor sentiment cooled last month as concerns mounted that slowing overseas growth, together with plunging oil and a strong US dollar are hurting the domestic economy. The S&P 500 fell 1.3% on the last day of January after investors learned the U.S. GDP grew by 2.6% during the fourth quarter, missing estimates and slowing from third quarter growth of 5%. For all of 2014, the economy expanded by 2.4% versus 2.2% growth in 2013. Crude oil futures fell another 10% in January, a seventh straight monthly decline, falling $52.12 per barrel since its most recent $100.36 peak on June 25, 2014. Meanwhile, relative to major world currencies, the US dollar is at its strongest level in over a decade, making American exports more expensive and thus less attractive. The Dow Industrials shed 658 points (-3.6%) during the month, while the NASDAQ Composite declined 2.1%.
Volatility returned with eight of January's 20 trading sessions producing 1% or greater moves on the S&P 500, three of them over 1.5%. Small-cap stocks, as measured by the Russell 2000 Index, underperformed large-caps, falling 3.2% in January. Mid-cap stocks fared better, with the Russell Mid Cap Index declining 1.6%. The Russell 1000 Growth Index fell 1.5% last month, while the Russell 1000 Value Index sank 4%.
Eight of the ten major equity sectors ended lower in January, led by Financials (-6.9%), Energy (-4.8%) and Technology (-3.9%). Utilities, the best performing sector last year up 29%, extended gains by 2.4% last month. Healthcare (+1.2%) also outperformed. Commodities lagged behind stocks and bonds in January with the Bloomberg Commodity Index falling for a seventh month, retreating 3.3%.
The MSCI EAFE Index, a broad measure of 21 global developed markets outside of the U.S. and Canada, gained 0.5% last month. The MSCI Emerging Market Index, an index representing 23 emerging nations' economies, also outperformed the U.S., returning 0.6%.
Treasuries, as measured by the Barclays U.S. Government Bond Index, returned 2.5% in January, its best start to a year since 1988. During the month, 10-year U.S. Treasuries rallied in price by nearly five points, sending its yield down more than 53 basis points to 1.64%, its lowest yield since May 2013 and the lowest in any January since 1988.
U.S. investment grade government, corporate and agency-backed bonds, as measured by the Barclays U.S. Aggregate Bond Index, returned 2.1% last month. The Barclays U.S. Corporate High Yield Index, a proxy for non-investment grade corporate bonds, gained 0.7%. Extending a 9.1% 2014 gain, the Barclays Municipal Bond Index returned 1.8% in January, its thirteenth consecutive monthly gain.
This information is compiled by Cetera Investment Management.
Securities and advisory services offered through Cetera Advisors LLC, member FINRA, SIPC. Cetera is under separate ownership from any other named entity.