January Market Recap
In writing these regular summaries of market events, there are some months in which very little seems to happen. And then there are months like this.
The headlines were so big and the flow of news so constant in January that markets are still sifting through the economic fallout. Equities managed to move higher in January, a positive sign for the year ahead, but the consequences remain very much unclear when considering how a new Presidential administration, devastating wildfires, disruptive A.I. technologies, and global tariffs will impact financial markets.
Ten of the 11 sectors in the S&P 500 delivered gains last month. Communication Services (powered by Meta, Alphabet, and Netflix) led the way, climbing 9%. Technology (dragged down by Apple, Nvidia, and Microsoft) was the worst-performing sector, losing 2.9%.
Benchmark Returns: January 2025 | YTD 2025
|
Dow Jones
|
S&P 500
|
NASDAQ
|
+4.70% | +4.70%
|
+2.70% | +2.70%
|
+1.64% | +1.64%
|
|---|
Stock prices dipped lower in the first half of January as investors continued to worry about a slowdown in the pace of interest rate cuts from the Federal Reserve. The same outlook caused bond yields to spike considerably. Ten-year US Treasury yields moved as high as 4.81% on January 14 (higher than at any point last year) before retreating to 4.57% by month’s end.
Higher interest rates have weighed on the real estate market. Existing home sales in 2024 fell to their lowest full-year level since 1995 (although that was only 1% worse than the year prior). Consumer sentiment weakened for the first time in six months, based on the University of Michigan’s monthly survey.
Meanwhile, wildfires near Los Angeles exploded into one of the worst natural disasters in American history fueled by drought-like conditions and 100 mile-per-hour winds. The fires burned for the entire month of January, killing at least 29 people and forcing 200,000 others to evacuate their homes. The Los Angeles Times has estimated the total economic losses to be more than $250 billion, and much of that may ultimately be paid by California taxpayers and the state-sponsored FAIR plan, a home insurer of last resort.
Equities eventually found their footing in mid-January and rose 4% over the last two weeks. The latest Consumer Price Index revealed that year-over-year inflation has ticked higher three months in a row. “Core CPI” decreased slightly from a month earlier, however, which helped boost stocks higher.
The Federal Reserve did in fact pause its rate-cutting last month, choosing instead to hold rates steady. In its written statement, the Fed noted that unemployment had “stabilized at a low level.” As for inflation, the Fed referred to it as “somewhat elevated.” Financial markets had anticipated the pause, but a freshly-inaugurated Donald Trump blasted Fed Chair Jerome Powell (who Trump himself appointed) in a series of Truth Social posts.
Toward the end of the month, Trump announced significant tariffs to be levied on goods imported from Canada (25%), Mexico (25%) and China (10%), only to delay the tariffs on our North American neighbors days later following conversations with those countries’ political leaders. The tariff conversation is one that will continue in the months ahead and has the potential for major economic consequences.
The most significant market-moving news of all last month involved Chinese technology company DeepSeek, which released an open-source artificial intelligence (A.I.) model it claims was built and developed at a fraction of the cost incurred by American tech giants.
DeepSeek’s new model caused the market to immediately recalibrate the valuations of several big technology companies including Nvidia, who’s stock crashed 17% in a single day (January 27). It’s a reminder of how fast A.I. technology is evolving and that much remains unknown about who the ultimate winners and losers will be.
US GDP grew by 2.3% annualized in the fourth quarter, according to initial projections released by the Commerce Department. Based on that number, the economy grew by 2.8% in calendar year 2024 (compared to 2.9% in 2023). Consumer spending, which accounts for roughly two-thirds of the US economy, rose a robust 4.2% in Q4.
Non-US Developed equities increased 4.8% in January, outperforming all the major US stock indices. Emerging Markets gained 2.2%. West Texas Intermediate crude oil eclipsed $80 per barrel in mid-January but ended the month trading at $72.53.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
Marks Group Wealth Management performs in-house analysis on companies. Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings. The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice. Additional information is available upon request.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser. Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.
Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
