In a stark contrast with the beginning of last year, U.S. equity markets generated positive returns in January. The S&P 500 increased 1.90% for the month, while small cap stocks, as measured by the Russell 2000, increased a more modest 0.39%. Value stocks (+0.60%) trailed growth stocks (+3.23%). Developed international stocks increased by 3.55%, while emerging market stocks increased by 5.47%.

Fixed income markets were positive in January even though interest rates were largely unchanged across the yield curve. The yield on the benchmark 10-year Treasury remained unchanged at 2.45% during the month. The Barclays Aggregate Bond Index increased by 0.20% for the month as Treasuries rose 0.23% and investment grade bonds increased by 0.31%. The Barclays High Yield Index again outperformed and increased by 1.45%. Municipals posted a modest increase of 0.04%.

Monthly Recap


The New Year started off favorably for stocks, as the post-election rally continued. Leadership, however, changed as large cap stocks outpaced small cap stocks and growth stocks outperformed value stocks. International equities performed better than domestic stocks, with developed markets outpacing the S&P 500 and emerging markets outperforming developed international markets.


Interest rates remained fairly steady during January with little change in levels across the yield curve. The yield on the 10-year Treasury of 2.45% was unchanged from the prior month. Treasuries and investment grade corporates posted positive returns. High yield bonds, yet again, outpaced more interest-rate-sensitive fixed income sectors. Municipal bonds remained little changed for the month, posting only a very slight gain.


The Federal Open Market Committee left the federal funds rate unchanged at its two day meeting that concluded on February 1st. The advanced reading of fourth quarter GDP was disappointing at only a 1.9% rate. Housing was mixed, with new starts and permits solid and sales of new and existing homes weaker than the prior month. Repeating last month, the ISM Manufacturing and Non-Manufacturing Indices signaled continued improving business conditions, and the University of Michigan Consumer Sentiment Index hit another post-recession high. The National Federation of Independent Business Index of Small Business Optimism jumped 7.4 points, the largest increase since 1980 and reaching levels last seen in 2004.

Event Period Estimate Actual Prior Revised
Nonfarm Payroll Dec 175,000 156,000 178,000 164,000
Unemployment Dec 4.70% 4.70% 4.60%
ISM Manufacturing Dec 53.8 54.7 53.2  53.5
ISM Non-Manufacturing Dec 56.8 57.2 57.2 56.2
Retail Sales ex Auto & Gas Dec 0.40% 0.00% 0.20% 0.30%
PPI MOM Dec 0.30% 0.30% 0.40%
PPI MOM ex Food & Energy Dec 0.10% 0.20% 0.40%
PPI YOY Dec 1.60% 1.60% 1.30%
PPI YOY ex Food & Energy Dec 1.50% 1.60% 1.60%
CPI MOM Dec 0.30% 0.30% 0.20%
CPI MOM ex Food & Energy Dec 0.20% 0.20% 0.20%
CPI YOY Dec 2.10% 2.10% 1.70%
CPI YOY ex Food & Energy Dec 2.20% 2.20% 2.10%
Industrial Production Dec 0.60% 0.80% -0.40% -0.70%
Housing Starts Dec 1,188,000 1,226,000 1,090,000 1,102,000
Building Permits Dec 1,225,000 1,210,000 1,201,000 1,212,000
New Home Sales Dec 588,000 536,000 592,000 598,000
Existing Home Sales Dec 5,520,000 5,490,000 5,610,000 5,650,000
Leading Index Dec 0.50% 0.50% 0.00% 0.10%
Durable Goods Orders Dec (P) 2.50% -0.40% -4.50% -4.80%
S&P CoreLogic CS 20-City YOY Nov 5.03% 5.27% 5.10% 5.09%
Personal Income Dec 0.40% 0.30% 0.00% 0.10%
Personal Spending Dec 0.50% 0.50% 0.20%
GDP Annualized QOQ 4Q (A) 2.20% 1.90% 3.50%
Univ. of Mich. Sentiment Jan (F) 98.1 98.5 98.1

Click here for a PDF of Glenn Dorsey’s Monthly Recap

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