Worst Monthly Performance Since March 2020

January 31, 2022

Coming off a strong year like 2021 we expected to see some selling in the early going this year, but we didn’t expect the worst January in 14 years for the S&P 500 and the worst overall monthly performance for the tech heavy NASDAQ since 2008!  Technology stocks are the growth engine for the market and this month they led the market lower.  The focus of the month was to reduce risk and we saw many of last years “darlings” drop 50% or more.  There are a number of “excuses” such as rising interest rates, tensions in the Ukraine, supply chain, chip shortage and of course the ever-present Covid, but the market had simply gotten ahead of the fundamentals and needed to correct.  The rate on the 10-year Treasury did rise about 18% during the month and oil prices continue to move towards $100, also gaining 18% in January to a 7 year high.  The market had a more than 4% rally the last 2 days of the month but the S&P 500 still ended the month down 5.3% and the technology ETF lost 6.8%. Their worst performance since March 2020.

The first 2 days of January are the final days of the of the traditional 7 day “Santa Clause Rally” and 2 days into the month the S&P 500 was fractionally higher.  Hawkish comments from the Federal Reserve midweek started the selling in tech stocks which accelerated when the government reported a mere 199,000 new jobs were created in December, about 40% of what was expected.  At the end of the week the S&P 500 had lost 1.9%.  During the second week we learned inflation in December had hit a 40 year high that pushed the rate on the 10-year Treasury to a 2 year high.  Retail sales for December were down much more than analysts had expected and the S&P 500 ended the week with a loss of .3%.  The third week was shortened by the Martin Luther King Jr holiday but saw a strong pick up in the selling of technology names that was exacerbated by disappointing subscriber growth from Netflix that sent that stock down 25%.  At the end of the 4-day week the S&P 500 had plunged 5.7%, its worst week since March of 2020.  The selling culminated the following Monday with the S&P 500 plunging 4% before rallying back to close fractionally higher.  Volatility continued during the last full week of the month before a strong rally on Friday that sent the S&P 500 to a closing gain for the week of .8%, the first positive week of the entire month. We ended a rough month with a second rally day on the 31st.

February is the only month of the year with an average return of 0%.  It also has the second lowest probability of closing higher at just above 50%.  There is going to be a lot of “noise” during the month, and we expect continued volatility.  President Xi and President Putin seem to have a good relationship so we wouldn’t expect Putin to do anything in the Ukraine during the Olympics.  With that said, he isn’t the most predictable person.  Corporate earnings reports will be in focus with the number of reports accelerating in February.  The market continues to carry a valuation that is higher than “normal”, with many expecting a rebound in international travel later this year will accelerate growth beyond what would be considered “normal”.  Since March of 2020 we have been using dips to add to attractive positions and we continue to believe that is appropriate.  Our economy has rebounded nicely from the Covid lockdown, but there is still significant pent up consumer demand that will show when we got out of the Covid fog.

If you know someone who would be interested in learning more about Greenberg Financial Group please contact us at 520-544-4909, or visit our NEW website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.

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