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Insights & Education

January 2020 Monthly Commentary

Updated: Mar 6

January 2020 Monthly Review

January was filled with what felt like enough geopolitical and global macro catalysts to fill a calendar year. Initially, markets enjoyed a continuation of the Santa Claus rally that began in December, but as the month progressed, global market fears were raised.

The roller coaster ride began on the first trading session of the year. Stocks and bonds were both sharply higher, cash was placed back into the market, the China trade agreement was put in place and “easy” FOMC policy gave investors confidence. 

Markets were jittered on the second trading day of 2020 when the US military killed a top Iranian military leader in a drone strike causing threats and warnings between Iran and the US.

On January 8th, stock and credit markets resumed an upward trajectory despite a few macro stories colliding. Iran retaliated in a soft attack and also shot down a Boeing 737 Ukrainian airline which fueled further headlines around Iran, Ukraine, and Boeing, in one deadly unfortunate incident in the bizarre month.

In mid-month, it almost looked like China might be off the radar for markets, as the first phase of the trade deal was signed. However, the Coronavirus out of Wuhan China began to grow in numbers and in the news. By month-end, fears of widespread growth of the virus, lack of trustworthy information, global GDP ramifications for quarantined workers, and lack of demand, were being absorbed by the markets.

Economic releases remained mixed for the US during the month. Earnings season, especially financial companies, generally reported solid numbers. Housing was the real bright spot, as housing starts recorded a 13 year high during the month. The employment picture remained buoyant, consumer confidence remained high, but manufacturing numbers were weaker. Low inflation data releases added to the bond market rally.

A Fed meeting came and went during the last week of January. While the Fed seems content with the current level of rates, they remained “dovish” with their extension of ongoing REPO operations until April. The FOMC seemed slightly more confident that inflation numbers would rebound to their “symmetric 2% objective”. By month-end, markets were much less focused on the Fed, and fixated on the “new SAARS”.

Supply and demand in the bond market was an ancillary story to the markets but may prove important as the year progresses. European corporate issuers had their largest issuance day in years. The US had some sub-par auctions as yield levels remained unattractive. Possibly most important, bond ETFs had historic inflows as asset allocation rebalancing continued in early January.

The MSCI All World Equity Index reached all-time highs by the middle of the month, up +2.5% through January 17th, before falling swiftly to end January in negative territory, ending down -1.08% total return for January.

Despite rates beginning the year at already relatively low yields, the risk-off events had investors running to the safety of the bond market. The Bloomberg Barclays Aggregate Bond Index was up +1.92% in January.

We believe January was a reminder of why investors should always have a cornerstone conservative fixed income allocation.

Please reach out to us at 646-518-2800 or to discuss your current fixed income needs.


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