Widespread positive macroeconomic data continued to drive global equities firmly higher in January. The major equity markets continued their ascent, led by emerging Asia and the US. In January, US Treasury prices fell and the 10-year yield ended the month at 2.7% but the S&P 500 roared ahead with prices up 5.6%.
The most notable market move over the month was the US dollar exchange rate. The dollar fell over the month, particularly following comments from Treasury secretary Mnuchin that a weaker US currency is good for US trade. As expected, the Fed left interest rates unchanged on January 31, but signaled another move is imminent. Probably they’ll raise rates once a quarter this year as solid growth momentum and a boost from tax cuts risks the central bank falling behind the curve on inflation. Employment figures in US also remained healthy, with unemployment unaltered at 4.1%. Wage growth picked up for a third consecutive month to 2.9% in January, the fastest year-over-year increase since 2009.
US equities enjoyed a strong advance. The market made significant advances overall but enthusiasm faded in the final days of the month. The Dow Jones Industrial Average produced its best January return since 1989, the S&P 500 notched its best January since 1997, and the Nasdaq Composite logged its best gain in that month since around 2012.
The Dow Jones Industrial Average logged a 5.8% rise in January, while the S&P 500 index registered a 5.6% climb. More cyclical areas of the S&P 500 – consumer discretionary, technology and financial names – were the best performers. Rate-sensitive areas such as utilities, real estate and telecoms were softer.
The Nasdaq Composite Index booked a 7.4% January rise.
A strong improvement in crude oil mainly drove the movement of the energy sector in January. WTI (West Texas Intermediate) crude oil active futures contracts rose 7% in January. Opec’s compliance towards production cuts and US dollar weakness proved supportive.
The precious metals registered a positive return, with gold up 2.8%.
The virtual currency bitcoin was down 29% in January, its worst monthly percentage drop in three years.
Ethereum remained in the green over the last month, up 30%.
US Dollar Index
Indicators and Market Valuations
Shiller Price/Earnings Ratio (GuruFocus.com)
Fear & Greed Index (CNN Money)
Index Trend Table (SwingTradeBot)