• The S&P 500® was down 0.16% in January, bringing its one-year return to 19.28%.
• The Dow Jones Industrial Average® lost 0.99% for the month and was up 13.03% for the one-year period.
• The S&P MidCap 400® decreased 2.70% for the month and returned 9.36% over the one-year period.
• The S&P SmallCap 600® returned -4.05% in January and 4.89% for the one-year period.
The Wall Street adage "as January goes, so goes the year," which has proven to be correct 71.4% of the time, ended with the S&P 500 posting a 0.16% decline for January. The index still posted six new closing highs throughout the month (five for the Dow), as the Street still looks “to find a reason to believe,” one more time. For January, you get to pick the fall guy, as the index return ex-Apple would have been worse, down 0.43%.
The month, which brought gains and new highs (the index was up 3.06% for the month on Jan. 17, 2020), saw positive earnings and the signing of the phase one U.S.-China trade agreement. The month opened with worries of World War 3 and closed with the rise and fall of tensions with Iran. Oil crossed above USD 64, but fell to close the month at USD 51, as the market was able to trade through the issues, while maintaining optimism and gains—that is, until the coronavirus took over as the top concern, dominating the end of the month. The debate on the Street was how much of the market reaction was due to the virus event, or if it was the market looking for a reason to take profits, after setting new highs without any major pullback (at that point, not even one day had posted a 1% decline since October 2019). The answer may be that it was time for a pull back, given “we” were all looking for one. However, the reality is that China took enormous steps and implemented a lockdown that affected 56 million people, vastly shifting resources and spending, and the effect of those actions—in and of themselves—will have a global impact (no man is an island). Regardless of the reason January brought the first trading day to decline at least 1% since Oct. 8, 2019 (-1.57%), which appeared more as a controlled sell-off than a free-fall; or the next day’s rebound (1.01%, helped by buying and bargain hunters), which was the first 1% gain since Oct. 11, 2019 (1.09%); or the last trading day’s 1.77% decline, when buyers appeared to keep their hands in their pocket (away from the button, and hopefully waiting for better prices), the virus event remains a major global issue. Any prolonged Chinese impact was seen as affecting global supply chains (and costs), which could easily make it a major U.S. market issue and appears to justify why it is now at the top of the list of market concerns (above trade, politics, and interest rates).