Global stock markets ended January with sharp losses. On January 15, the S&P 500 stock index posted a new all-time high. However, concerns about the global economy and U.S. company earnings coupled with turmoil in emerging markets drove the S&P 500 index down 3.5%; this was its worst monthly performance in the past two years. The European and Japanese stock markets each fell 3.9%. The Emerging markets fell 6.6%. Although emerging markets may continue their downward momentum in the short run, they remain an important component in a properly diversified portfolio. In the long run, emerging markets are likely to grow faster than developed markets.
Turning to fixed income markets, interest rates fell and bond prices rallied. The 10 Year U.S.Treasury Bond index returned 3.54%. The S&P U.S. Investment Grade Corporate Bond Index returned 1.92%. S&P’s National AMT Free Municipal Bond Index returned 2.12%. Barclay’s U.S. inflation protected securities index returned 1.98%. High-yield bonds, as measured by S&P’s U.S. High Yield Corporate Bond Index returned 0.76%.
The DJ-UBS Commodity Index returned 0.3%. Despite positive returns in energy (+3.45%) and precious metals (+1.9%), the Commodity index was weighed down by industrial metals (-4.91%) and grains (-1.1%). Gold gained 3.1%. Silver declined 1.3%.
The U.S. Senate confirmed Janet Yellen to succeed Ben Bernanke. The Federal Open Market Committee decided to continue tapering its monthly asset purchases.
The Bureau of Economic Analysis estimates real U.S. gross domestic product (GDP) growth at 3.2% in the fourth quarter of 2013. This bodes well for further growth this year.