Current Monthly Market Recap
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Global equity markets posted mixed results for the month as Europe rallied on aggressive new stimulus measures, while U.S. equities declined amid slowing economic growth and disappointing corporate earnings. Meanwhile, U.S. bond markets posted modest gains for the month as investors sought out the relative safety of U.S. government debt.
Now let's first review the U.S. equities markets.
The U.S. stock market encountered heightened volatility in January as investors reacted to disappointing earnings reports and concerns about slowing economic growth. The Standard & Poor's 500 Index declined 3% with nearly half of the loss occurring on the last trading day of the month. The Dow Jones Industrial Average and the NASDAQ Composite Index also ended the month in negative territory, losing 4% and 2%, respectively.
Within the S&P 500 Index, defensive sectors recorded the only positive returns, with Utilities gaining 2%, and Health Care ending the month 1% higher. Meanwhile, Financials turned in the biggest losses for the month, falling 7% after some of the big banks were hampered by lower trading revenue, while energy stocks suffered the second largest loss for the month, as oil prices continued to decline and several energy companies announced capital expenditure cuts. An interesting development coming out of the Information Technology sector was that Apple, the largest publicly held company in the world, set a new quarterly record earning $18 billion during the 4th quarter.
Let's now turn our attention to the foreign equities markets.
European markets advanced for the month as investors cheered the start of a long-awaited stimulus program designed to boost economic growth in the 19-member euro zone. After hinting at it for months, the European Central Bank announced in mid-January that it would launch a monthly bond-buying program similar to the recently concluded program here in the U.S. For the month, international developed markets advanced with a 1% gain.
After closing 2014 in negative territory, international emerging markets also started the New Year by posting a modest gain. Several Asian markets moved modestly higher for the month amid expectations that most economies in the region would benefit from the weaker oil prices. For the month, the MSCI Emerging Markets Index advanced 1%.
Finally, let's switch our focus to the U.S. fixed income markets.
U.S. fixed income markets advanced for the month as low and declining yields in non-U.S. markets and worries about the global economy slipping into deflation increased the demand for the relative safety of U.S. government debt. For the month, U.S. investment grade bonds posted a 2.1% total return.
Finally, U.S municipal bonds started the year in positive territory as many states, cities, schools, and other issuers in this market refunded outstanding debt and took advantage of falling interest rates. For the month, the Barclays Municipal Bond Index recorded a 1.8% total return.
As we wrap-up this broadcast we want to highlight that the U.S. stock market finds itself in rarefied air as it begins 2015. For only the sixth time in the past 150 years, the U.S. stock market has registered a double-digit annualized return for three consecutive calendar years like the performance we saw during 2012 to 2014. Can the U.S. stock market score a four-peat in 2015 and land another year of double-digit gains? Tune in next month to check the market's progress and keep up-to-date on other current developments. As always, thank you for listening to the State Farm Market recap.
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This recap has been prepared by State Farm VP Management Corp. for informational purposes and should not be considered a recommendation to buy or sell any security. Any opinions discussed herein reflect our judgment as of the date of publication and are subject to change.
Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.
Neither State Farm nor its agents provide investment, tax, or legal advice.
The S&P 500® Index tracks the common stock performance of 500 large U.S. companies.
The MSCI Japan Index is designed to measure the performance of the large- and mid-cap segments of the Japan stock market.
The Barclays U.S. Aggregate Bond Index represents debt securities in the U.S. investment grade fixed rate taxable bond market.
The Barclays Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market.
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