New year, new markets.
Coming off a rocky 2022, markets kicked off the new year in style. Stocks surged higher in January with many of last years laggards pulling a u-turn. The tech-heavy Nasdaq led the way with a gain of 10.68%, while the S&P 500 and Dow Jones Industrial Average still gained 6.18% and 2.83% respectively. As a whole, smaller companies outpaced larger companies during the month as well.
Helping propel markets was the growing belief that slowing inflation could soon result in a Fed pivot. As expectations for a less aggressive Fed developed, investors began to price in a higher probability of a “soft landing” rather than a prolonged economic contraction. With over-all sentiment increasing, investors turned back to some of last years biggest losers (i.e. con-sumer discretionary and technology), hoping there will be smoother sailing ahead with a poten-tial Fed shift in the near future.
International equities were also up for the month, with developed international stocks jumping 9.03% and emerging markets gaining 8.34%. This continued the strong performance from last year as companies overseas closed out the fourth quarter of 2022 with some relative strength.
As expectations for a Fed pivot increased, interest rates plunged as the 10-year Treasury yield fell from 3.88% to 3.52%. With rates falling, bond prices increased resulting in a 3.08% gain for the US aggregate bond market. Coming off the worst year of losses in bond market history, the gains were a welcomed change of pace for fixed-income investors.
While we’re only a month into 2023 it’s been a strong start for markets, helping alleviate some of the pain from last year. As optimism increases, it’s important to remain grounded while fol-lowing a long-term investment plan. It can be easy to get caught up in the excitement of re-covering markets, chasing gains higher. However, it’s not unreasonable to expect some volatil-ity as markets continue to feel their way through the events of the past couple years. Sticking with a long-term strategy can help ensure you are making sound, rational investment decisions regardless of market conditions.
Bed, bath, and what’s going on?
The retailer Bed Bath & Beyond went on a wild ride in January as meme stock mania struck again.
Early in the month the company announced it was at risk of going bankrupt as it struggled to attract new shoppers and was having trouble covering key expenses. This news sent the stock price down over 47% YTD through January 6.
However, the stock soared approximately 300% over the ensuing days as retail investors scooped up the embattled home-goods icon.
Unfortunately the good times didn’t last as it was announced on January 13 the company was in talks to sell its assets as part of a potential bankruptcy filing (shocker). This news sent the stock plunging back down over 50% from its high.
When all was said and done, the stock closed the month up 12%, with a good story to boot.
They grow up so fast…
January 29 marked the 30-year anniversary of the first ETF (exchange-traded fund) when the SPDR S&P 500 ETF Trust was launched.
At the time, nobody really paid much attention to the investment vehicle, and it only had $6.5 million in assets. Fast-forward three decades and the first ETF happens to be the largest, with over $375 billion in assets now.
As a whole, the ETF sector has grown to $6.5 trillion in assets. While this is still only 1/3 the size of the mutual fund market, the tides have been turning and the gap has continued to narrow as time moves on.
Few would have predicted this event would revolutionize the industry in the way it has. ETFs have helped lower industry fees and made diversified investing more accessible.
Cheers to the next 30 years!
Broad Market Returns
| Asset Class | 1 Month | 3 Month | YTD | 1 Year |
| S&P 500 (VOO) | 6.29% | 5.71% | 6.29% | -8.22% |
| NASDAQ (QQQ) | 10.64% | 6.25% | 10.64% | -18.25% |
| Large Cap Growth (VUG) | 10.38% | 5.83% | 10.38% | -18.55% |
| Large Cap Value (VTV) | 2.79% | 5.35% | 2.79% | 1.73% |
| Small Cap Growth (VBK) | 11.67% | 7.47% | 11.67% | -8.33% |
| Small Cap Value (VBR) | 9.07% | 8.60% | 9.07% | 3.41% |
| Developed International (VEA) | 9.03% | 20.03% | 9.03% | -4.00% |
| Emerging Markets (VWO) | 8.34% | 21.07% | 8.34% | -11.52% |
| REITs (VNQ) | 10.40% | 11.29% | 10.40% | -11.09% |
| Aggregate Bonds (BND) | 3.31% | 6.24% | 3.31% | -8.34% |
| Corporate Bonds (VCIT) | 4.23% | 8.41% | 4.23% | -8.06% |
| High Yield Bonds (JNK) | 4.03% | 5.77% | 4.03% | -6.06% |
| Long Term Treasuries (VGLT) | 7.14% | 11.75% | 7.14% | -21.39% |
| International Bonds (BNDX) | 2.36% | 1.97% | 2.36% | -9.45% |
Market Health Indicator
The Market Health Indicator (MHI) measures market health on a scale of 0 – 100, analyzing various market segments such as economics, technicals, and volatility. Higher scores indicate healthier market conditions.
Fun Facts
- Only 8 nations have won the World Cup since its founding in 1930 – Brazil, Germany, Italy, Argentina, Uruguay, France, England, and Spain.
- The birthday paradox shows that in a random group of just 23 people, there is about a 50 percent chance that two people have the same birthday.
- In Toy Story, Buzz Lightyear’s original name was Lunar Larry. However, after some back and forth it was changed to honor Buzz Aldrin.
- There are more people living in California than in Canada.
– The Aspire Wealth Team
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