GLOBAL STOCK MARKETS FINISHED JANUARY WITH MIXED RESULTS, REFLECTING A MONTH OF CAUTIOUS OPTIMISM AND SOME PROFIT-TAKING, GIVING BACK SOME OF THE GAINS POSTED MID-MONTH.
MONTHLY PERFORMANCE
US Market Performance: The Dow Jones Industrial Average closed the month up 0.3%, the S&P 500 slipped slightly by 0.1%, and the Nasdaq Composite retreated by 0.8%.
Global Markets: It is notable whilst US and EU markets make new highs, China and Emerging markets more generally continue to struggle.
SECTOR LEADERS AND LAGGARDS
Communication Stocks Takes Centre Stage: The Communication Services sector emerged as the leader for the month, surging 4.4%, fuelled by strong earnings reports from major media companies.
Materials Struggle:** The Materials sector lagged the market, declining by nearly 5%. This decline could be most likely be attributed to concerns about slowing demand in the construction and manufacturing sectors.
MARKET MOVERS
Central Bank Focus: All eyes were on the Federal Open Market Committee (FOMC) meeting that began on January 30th. Investors awaited any hints about the future pace of interest rate hikes, but no major announcements were made on the post meeting communique.
Geopolitical Concerns: Ongoing tensions in the Middle East remain a source of underlying market anxiety, but much of the Gaza crisis has for now at least, been priced into energy markets.
OTHER ASSET CLASSES
Bond Market Activity: Treasury yields witnessed some upward movement with the 10-year U.S. Treasury note inching closer to the 4% mark. This suggests investors are pricing in the possibility of future interest rate increases.
Currency Market Shifts: The U.S. Dollar saw a slight gain against major currencies, potentially reflecting a flight to safety due to lingering geopolitical uncertainties.
Commodities on Hold: Overall commodity prices remained largely unchanged. Crude oil prices continue to be influenced more heavily by future economic activity, than geopolitical tensions.
Precious Metals Performance: Gold prices experienced some volatility but closed the month near $1,800 per ounce. Silver prices also fluctuated but ended January slightly above $21 per ounce. At this point, precious metals look particularly good value.
OVERALL
The market will closely monitor the FOMC’s policy decisions and any indications on future interest rate adjustments. Increasingly, they are pricing in ‘macro perfection’, – that is to say slowing inflation, yet a reacceleration in global growth led by manufacturing. Commodities look ready to rally, after a reset in crude prices, positioning and sentiment all appear to support a bottoming of the commodity complex more generally here.
