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Capital Market Recap - January 2019

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SUMMARY

  •  U.S. equities rallied in the new year. Contributing factors included both a better-than-expected start to the earnings season and a “patient” Fed willing to delay further interest rate hikes. U.S. manufacturing saw improvements in operating conditions with domestic demand leading to new business growth. Business confidence saw an uptick among manufacturers. However, the government shutdown and market volatility caused consumer confidence to decline in January, even though economic conditions remain favorable. The economy added 304,000 jobs in January which marks the 100th straight month of increased employment.
  • International and emerging market equities posted positive returns in January, even as economic data points to slower growth. Eurozone operating conditions improved, but at the slowest rate in over four years. In Japan, manufacturing experienced weaker improvement in business conditions and new export orders fell at the steepest rate in over two years. Softer demand in China lead to declining production and the first fall in purchasing activity in 20 months. Overall, growth of the global manufacturing sector (excluding the U.S.) is trending toward stagnation with the rate of expansion hitting a 31-month low in January.
  • Fixed income investments were positive for the month. The 10-year Treasury yield fell to 2.63% as bond prices rose in January (interest rates and bond prices move inversely). The Federal Open Market Committee supported a patient approach to monetary policy and hinted at pausing their tightening cycle for the near-term. High yield bonds posted the best monthly return since October 2011.

U.S. EQUITIES

  • Broad U.S. stocks were positive (up 8.6%) for the month but remain negative on a 1-year basis (down -2.3%).
  • Size – Small-cap (11.3%) and mid-cap (10.8%) equities outperformed large-cap (8.4%) equities during the month. Large-cap stocks continued to lead on a 1-year basis over small-cap stocks (-2.2% vs. -3.5%).
  • Style – Growth stocks (9.2%) outpaced value stocks (8.0%) in January as well as on a 1-year basis (0.0% versus -4.8%, respectively).

S&P 500 Sector Returns for January 2019:

LOOKING AHEAD

  • Investing in the current environment can be challenging as market prices and volatility seem to unpredictably rise and fall. We encourage investors to stay focused on fundamentals of long-term investing and the benefits of diversification.
Sources: Morningstar, Inc., Barclays Capital, Russell and MSCI, U.S. Bureau of Labor Statistics, The Conference Board, IHS Markit, The Federal Reserve (central bank of United States), The Bureau of Economic Analysis (U.S. Department of Commerce) & U.S. Department of Treasury

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All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.