Market Recap – Jan 2014

Increased confidence in a strengthening U.S. economy helped decrease investor confidence in several emerging-market countries, and financial markets around the world felt the strain in January. Investors worried that as the Fed cuts its bond purchases and eventually begins to move away from rock-bottom interest rates, money would be lured away from emerging markets, especially those already facing financial or political instability. That wasn’t the only threat that roiled markets overseas. As several countries attempted to manipulate their currencies to try to attract buyers or fight inflation, a disappointing report on China’s manufacturing sector did little to allay investor concern.

Developed markets weren’t immune to the contagion. Large caps, many of which earn a substantial percentage of their revenues overseas, were hurt the most. After hitting an all-time record on December 31, the Dow had its worst January since 2009, while the S&P 500 went from an all-time high on January 15 to a loss for the month in just two weeks. The Nasdaq, which led the pack in 2013, lost the least, followed by the small caps of the Russell 2000. Not surprising given the rout in emerging markets, the Global Dow also suffered. And as frequently happens during periods of global instability, investors turned to such traditional safe havens as U.S. Treasuries; the yield on the benchmark 10-year note fell as demand pushed prices up.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Source: Broadridge