A reality check for the stock markets of the world in January with heavy losses and a major bull back in the major indices after the over-exuberance of 2013. The U.S. market finished with its largest monthly fall since May 2012.
Shares ended the week and the month with steep losses after continued worries about emerging markets, confirmation of continued tapering by the Federal Reserve and some lacklustre earnings news from the U.S. (including Amazon.com which was down 11% on Friday after Q4 2013 earnings came in short).
The S&P 500 finished at 1,783 the third weekly drop in a row, down 0.4% for the week and 3.6% for the month. The Dow Jones Industrial Average close down 150 points yesterday at 15,699 and ended the week 1.9% lower and 5.2% lower for the month. The Nasdaq composite dropped 1.7% lower in January to finish at 4,103. The FTSE 100 finished at 6,510 a drop of 2.3% on the week and a fall of 3.5% for the month, having started 2014 at 6,749.
But these falls in developed markets equities pale into insignificance compared with the drop in emerging markets over recent weeks as currency jitters have dominated investors minds. The iShares PLC iShares MSCI Emerging Markets fund has dropped 6.5% since the beginning of 2014 and 11.32% over the last 12 months.
A sharp fall in emerging markets currencies including the South African Rand, Turklish Lira and Argentinian Peso prompted investors to dump risk-on assets and move back to safe havens like gold.
This sell off felt like it was needed after an incredible “Santa Rally” at the back end of 2013. The S&P 500 rose 29.6 percent over the year, its best annual performance since 1997, while the Dow climbed 26.5 percent in its best year since 1995. The Nasdaq was even better at 38.3 percent, its best year since 2009.
But with the U.S. economy growing at an annualised 3.2% in the fourth quarter if 2013 it looks like American economy is set for a strong 2014 despite the continued tapering of quantitative easing by the Federal Reserve. U.S. growth was slower than the 4.1% posted in the third quarter of 2013, but the second half of 2013 was the strongest six-month stretch since late 2011.
After shifting my pension pot from global equities to cash in late 2013, this week I have rotated back much of my position to equities, with a small bet on emerging markets included after the heavy sell off. The over exuberance of December seems to have cooled with a healthy dose of profit taking and with any hint of bad news being sold into, this seems a good time to be back betting on equities.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
Heavy equity sell off in January 2014 after mega gains of 2013
Feb 1, 2014 at 8:39 am in Market Commentary by contrarianuk
A reality check for the stock markets of the world in January with heavy losses and a major bull back in the major indices after the over-exuberance of 2013. The U.S. market finished with its largest monthly fall since May 2012.
Shares ended the week and the month with steep losses after continued worries about emerging markets, confirmation of continued tapering by the Federal Reserve and some lacklustre earnings news from the U.S. (including Amazon.com which was down 11% on Friday after Q4 2013 earnings came in short).
The S&P 500 finished at 1,783 the third weekly drop in a row, down 0.4% for the week and 3.6% for the month. The Dow Jones Industrial Average close down 150 points yesterday at 15,699 and ended the week 1.9% lower and 5.2% lower for the month. The Nasdaq composite dropped 1.7% lower in January to finish at 4,103. The FTSE 100 finished at 6,510 a drop of 2.3% on the week and a fall of 3.5% for the month, having started 2014 at 6,749.
But these falls in developed markets equities pale into insignificance compared with the drop in emerging markets over recent weeks as currency jitters have dominated investors minds. The iShares PLC iShares MSCI Emerging Markets fund has dropped 6.5% since the beginning of 2014 and 11.32% over the last 12 months.
A sharp fall in emerging markets currencies including the South African Rand, Turklish Lira and Argentinian Peso prompted investors to dump risk-on assets and move back to safe havens like gold.
This sell off felt like it was needed after an incredible “Santa Rally” at the back end of 2013. The S&P 500 rose 29.6 percent over the year, its best annual performance since 1997, while the Dow climbed 26.5 percent in its best year since 1995. The Nasdaq was even better at 38.3 percent, its best year since 2009.
But with the U.S. economy growing at an annualised 3.2% in the fourth quarter if 2013 it looks like American economy is set for a strong 2014 despite the continued tapering of quantitative easing by the Federal Reserve. U.S. growth was slower than the 4.1% posted in the third quarter of 2013, but the second half of 2013 was the strongest six-month stretch since late 2011.
After shifting my pension pot from global equities to cash in late 2013, this week I have rotated back much of my position to equities, with a small bet on emerging markets included after the heavy sell off. The over exuberance of December seems to have cooled with a healthy dose of profit taking and with any hint of bad news being sold into, this seems a good time to be back betting on equities.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.