Markets bounce back – at home and abroad.

January saw positive returns across markets. Read more to find out what happened and what it may mean for you.

What happened.

After a disappointing December, stocks surged in January at home and abroad. US small-cap stocks led the pack, up 10.64% (S&P 600 Index). Large caps were also strong, up 8.01% (S&P 500 Index). International stocks fared well, with emerging-market stocks up 8.76% and developed- market stocks up 6.57% (MSCI Emerging Market and EAFE indexes). Volatility was comparatively low: the S&P 500 moved by more than +/- 1% on only six days in January. Bonds were up as well, with the Bloomberg Barclays Aggregate Index rising 1.06%.

Why it happened.

The Federal Reserve loomed large over markets in January. The month’s biggest jump in the S&P 500 came on the day the Federal Reserve Chairman said the central bank was willing to adjust its policy to help the economy if needed. The second biggest jump was on the day the Fed kept interest rates unchanged and signaled there were no increases imminent.
Earnings news also affected markets. We’re now in earnings season, when companies report how they fared in the last quarter of 2018. So far, actual earnings for a large majority of companies have beaten expectations—and remember, markets react to what happens compared to what’s expected. US economic news was mostly positive too.

The US private sector added more jobs than expected and wages rose faster than expected, though there were some signs of weakening in manufacturing. Globally, the International Monetary Fund struck a more cautious note in a report forecasting weakening economic growth around the world.

What this means for you.

We build your personal portfolio to help you achieve your goals, while taking into consideration your tolerance for risk. In this month’s sidebar, we look at the lessons of December and January. It’s importance to understand your tolerance for the inevitable ups and downs of markets and set your portfolio’s risk level accordingly. In January, your portfolio will probably have seen positive returns. The more aggressive the portfolio—because you’re further from retirement or have a higher risk tolerance—the better it will likely have done. As always, it’s important that we know as much as possible about your personal situation and risk preferences. Please let us know of any changes by logging into your Financial Engines account or calling one of our advisors.

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