Once again, the Fed was the story for investors in January.
The SPDR S&P500 ETF (SPY) finished the month with a gain of 8% while the NASDQ 100 (QQQ) ETF was up 9%.
Yields on the Ten Year Treasury settled at 2.63% down slightly from December’s close of 2.69%. Accordingly the iShares Core US Aggregate Bond ETF (AGG) posted a total return of 0.9% for January.
The SPDR Gold Shares ETF (GLD) gained 2.9% for the month.
Core ETF Performance
ETF January Year to Date
SPY – SPDR S&P 500 8.0% 8.0%
QQQ – Invesco QQQ (NASDAQ) 9.0% 9.0%
GLD – SPDR Gold Shares 2.9% 2.9%
AGG – iShare Core US Aggregate Bond 0.9% 0.9%
After a rough 4th Quarter to end 2018 which saw stocks down by nearly 15% as measured by the S&P 500, Federal Reserve Chairman Jerome Powell along with former Chairmen Been Bernanke and Janet Yellen, gave the markets a pep talk early in the month and indicated there would be flexibility in Fed policy going forward. This was in contrast to Powell’s comments after the December Federal Open Markets Committee (FOMC) in which he seemed to be standing up to significant criticism of Fed policy from President Trump.
On the earnings front FactSet reports that with nearly half of S&P500 companies reporting in January “The percentage of companies reporting actual EPS above estimates (70%) is below the five-year average. In aggregate companies are reporting earnings that are 3.5% above the estimates, which is also below the five-year average.
The Fed also closed out the month with a dovish statement after the January FOMC meeting in which Powell essentially acknowledged an effective about face from December comments. In other words the Fed Put is Back.
Going forward markets will like focus attention on the ongoing White House trade negotiations with China, as well as technical trading levels given that the market has undergone a furious bounce back from December lows.
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