The month looked like it could head south much like December, but
Fixed Income: 2-Yr Treas Yield 4.22% | 10-Yr Treas. Yield 4.58%
Rates all along the curve were little changed in January. There certainly was moved throughout the month, but nothing meaningful as the 10-year treasury remained fairly range bound for the month. Rates were higher in the front half of the month and slid back to their starting point by the end of the month. Much was made about the potential of tariffs in January. As the month closed out they became a reality for China, but Tariffs against Mexico and Canada are temporarily on hold. The relevance to rates is that Tariffs would cause upward pressure on prices which prevents the Federal Reserve Board (FRB) from pursuing cutting interest rates at am aggressive pace. The FRB meeting that shows a solid chance of a rate cut is currently projected as June, according to CME Fedwatch.
Equities: Dow Jones 4.70% | S&P 500 2.70% | NASDAQ 1.64%
The Dow Jones was the big outperformer for the month of January. This was likely the result of their lower concentration in Technology stocks. December saw its wild day come at the hands of the FRB. January saw its wild day as a result of DeepSeek. While we had a handful of more volatile market sessions, the overall VIX index (a measure of market volatility) sits at 15.77. At its highest in January it sat at 19.54. The way to interpret that number is to understand that you take the index reading, divide it by 30 and that is the expected volatility on the daily over the next thirty days. 15.77 would mean we should expect stock market movements of around 0.53% daily… Not very volatile.
Conclusion
For a month when markets seemed to ebb and flow wildly, they really did not. We saw a few volatile days, but otherwise profits (courtesy of a strong earnings season so far) as the month ended in the green for all three major indices.
A Look Ahead…
A market correction was due in the 4th quarter of last year and has yet to materialize. As of January 31st, the S&P 500 carries a P/E ratio of 22.43. That reading is approximately 25% rich to its long-term norms. A correction is still due, and valuations warrant it.
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