Looking at growth and value stocks, performance advantage of a style largely depended on the index examined. The broadest market indices (for growth and value styles) favored growth.
While all S&P 500 sectors were positive for the month, many of the more defensive sectors (Health Care, Consumer Staples, and Utilities) performed poorly on a relative basis which is a reversal from the last quarter of 2018. Industrials and the Energy sectors were the best performing sectors with advances over 11%. As has been pointed out repeatedly Energy stocks have been the most volatile of shares for the last few years. The Technology sector turned in decent performance but performed mediocre relative to the majority of the other 10 sectors. This may be indicative of money not coming back into the more popular growth stocks.
Both Developed International and Emerging Market shares advanced in the mid-single digit range for the month. Not a single major international equity index posted negative returns. The U.S. dollar weakened slightly.
Domestic bonds posted slightly positive returns. High yield bonds reversed their late ’18 sell-off and were up over 4% for the month. Bond yields remained in a tight trading range in January. Globally, international bonds also posted positive gains for the month of around 1%.
While January was a good month for investors we continue to be cautious as expectations for this year moderate. Global economic growth rates continue to be revised slightly downward. Concerns about China’s economy persist. Most of the downward revisions to 2019 S & P 500 earnings have been made. The outcome of trade talks with China and Brexit remain unanswered. Consequently, we believe that the domestic capital markets will remain volatile compared to the last couple of years.