January returns slid significantly across all asset classes, with the exception of commodities. Value lead growth stocks, consumer defensive beat consumer cyclical stocks, and large cap led mid- and small-cap stocks. A consistent theme in January returns was the strong relative return momentum of international segments in each asset class. For example, Emerging market equities offered the best returns and diversification. Moreover, we saw international infrastructure project bonds outperform their US counterparts, as well as the S&P 500 Index. Finally, commodities start the new year with palladium, natural gas and heating oil leading all others in returns.
The following analysis provides a visual record of returns across and within the major asset classes. The report is intended to help investors with portfolio comparisons and performance benchmarking.
The S&P 500 index was down -7.61% in January after accounting for dividends. In contrast, only two equity benchmarks closed in positive territory: the S&P 500 Energy Index (+14.7%) and the small-cap S&P 600 Energy Index (+3.8%). Loss leaders included the small-cap Health Care stocks (-15.5%) and large cap Consumer Discretionary stocks (-15.3%).
Elsewhere, red ink is apparent across all the developed market indices with the exception of Hong Kong (+0.90%) and the United Kingdom (+0.60%). In general, return momentum favored ownership of international stocks , which outperformed the S&P 500 by 150 basis points on average. Loss leaders – Denmark, Sweden NA New Zealand – all had returns losses in excess of 11%.
Next, we see that emerging market equities offered solid returns and diversification. For instance, the S&P Emerging Market Index led the S&P 500 index by 476 bps. Brazilian stocks delivered the strongest performance (+13.69%), followed by stocks in Chile (+10.7%) and Qatar (+8.6%). Finally, loss leaders included Russia (-11.7%), Korea (-9.3%() and Taiwan (-6.6%).
Returns across all bond durations suffered price declines in January. Again, we note that relative return momentum favored owning international bonds. For example, the Global Aggregate Bond Index (-0.64%) led the US aggregate Bond Index (-1.32%) by 68 basis points. Even TIPS (-1.76%), long popular in 2021, ended the month at the bottom of the list with Emerging Market bonds (-2.38%).
In January, REITS and US infrastructure project bonds lagged behind the S&P 500 Index for the first time in months. The strongest relative performance was seen in US Corporate bonds (-1.08%) and Emerging Market Corporate bonds (-1.61%). Meanwhile, the High-Yield Bond index (-2.63%) beat many US equities sectors by over 500 basis points.
The asset class with significant price appreciation in January was commodities. At he top of the list are the returns for palladium (+30.0%), natural gas (+21.6%) and heating oil (+18.2%). Meanwhile, we see that negative returns this month for copper (-2.5%) and lumber (-7.8%).
The strongest gains for the month were seen in the Brazilian real (+3.09%) and the South African rand (2.97%). The Russian ruble (-4.53%) suffered the greatest losses.