The Markets February 2, 2015

2.2.15

It’s true. January did not turn out to be the best month for U.S. stock markets. At the end of the month, the Standard & Poor’s 500 Index (S&P 500) was down about 3.1 percent. Before you start listening to pithy observations – the saying ‘as goes January, so goes the year’ has been making the rounds – think back to January 2014. The S&P 500 finished the month down 3.6 percent and still managed to deliver positive performance (up 11.4 percent) for the year.

That said, there is a lot going on around the world and it’s making markets as feisty as a broody hen. Some of the issues include:

  • Low, low oil prices: Oil prices are a boon to consumers at the pump and a detriment to the oil industry which has suffered layoffs and cancelled projects, according to Barron’s.
  • Greek elections: The Syriza party won the Greek election on promises to reduce austerity measures and restructure Greek debt. Forbes reported there is uncertainty about how this will affect the Greek economy and the euro.
  • Currency issues: The Federal Reserve is tightening monetary policy while other central banks are easing. With the value of the euro dropping from $1.45 to about $1.15, U.S. exports are getting more expensive overseas, but it has become a lot cheaper for Americans to travel to most parts of Europe.
  • Deflationary pressures: com reported prices in the Eurozone fell 0.6 percent year-to-year in January. That was after a 0.2 percent decline in December. Some folks are worried inflation in the U.S. could be headed south, too, if the Federal Reserve raises interest rates too much, too soon.

While stock markets have been struggling (the Dow and the S&P 500 are down but still within 5 percent of their December record highs, according to Barron’s), the government bond market has been thriving. Experts cited by Barron’s estimated about 16 percent of the government bonds they track, about $3.6 trillion worth, traded at negative yields last week. MarketWatch.com reported, for just the fourth time in more than 50 years, the dividend yield on the S&P 500 Index was higher than the yield on benchmark 10-year Treasury bonds last week.

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