The four themes driving the markets
MONTHLY MARKET COMMENTARY |
The financial markets kicked off 2016 with a loud “thud!” January was pretty rough for most risky assets. Domestic stocks were hit hard as investors determined how the U.S. economy would be affected by global growth concerns, especially in China, along with the quickly dropping price of oil. Fixed income once again became more of a safe haven asset, with the Barclays U.S. Aggregate index returning 1.4 percent and the JP Morgan GBI Global ex-U.S. Hedged index delivering 2.0 percent during January. The 10-year U.S. Treasury actually closed below 2 percent (on Jan. 20 at 1.98 percent) for the first time since mid-October 2015. The 10-year U.S. Treasury closed January even lower at 1.93 percent (Source: Yahoo! Finance). This drop in rates for the 10-year U.S. Treasury comes on the heels of the Fed raising short term interest rates in December 2015. Remember, prices and yields move inversely to one another.
There were really four themes driving the markets in January. One theme was China with its slower growth, a second theme was oil and supply issues, a third theme was the continued uncertainty with the Fed and its decisions around interest rates, and a fourth theme was the negative momentum and investor sentiment that added fuel to the fire.