What a difference a month can make! Following a rough December, we kicked off 2019 on a much more positive note with virtually all equity and bond indexes posting gains for the month. Equity investors received some much-needed relief from the best January we’ve had in decades, as the S&P 500 posted an 8% gain for the month. Small-cap stocks, which were hit particularly hard in December, experienced a strong rebound in the month as well, with the Russell 2000 gaining 11.2%.
Markets were supported by the beginning of corporate earnings season, with companies largely reporting better-than-expected results. Further, the latest notes from the Fed suggested that additional rate hikes in 2019 are less likely than previously communicated, thus alleviating investor concerns that the Fed would be overly restrictive – all of which contributed to positive returns for Fixed Income Securities as well.
Market prognosticators are calling for GDP growth of approximately 2.5% in 2019, and January data continued to validate the strength of the U.S. economy. Initial jobless claims were lower than anticipated, and while the manufacturing activity as measured by the ISM Index decelerated, it remains expansionary. In spite of the strong fundamentals, investors remain skittish about several concerns, including that the U.S. economy is in the late stages of its near-decade long expansion; slowing growth in China; and uncertainty surrounding the Brexit negotiations. These issues are likely to remain in the headlines, and any unanticipated developments are likely to make an impact on the market.