Two halves make a whole January

Mike Loewengart, Vice President of Investment Strategy

E*TRADE Capital Management


January was a tale of two months. The first half seemed like a continuation of December—a month that wrapped an exceptionally strong year for the markets—as US equities brushed off geopolitical tensions and weak manufacturing data to climb to new highs. The mid-month signing of the long-awaited US-China Phase-One deal only served to further stoke the flames of an already hot market.

Stock momentum ebbed toward the end of the month, though, and was finally reversed amid the coronavirus outbreak. Equities experienced their biggest pullback since October as the virus spread and health officials confirmed the first human-to-human transmission in the United States.

The Fed closed out the month with a unanimous decision to keep interest rates unchanged—consistent with previous indications that it would remain on the sidelines for the foreseeable future.

US equities

Another trend that carried over from 2019 was strength in tech stocks, which helped the Nasdaq Composite lead the major US benchmarks by a wide margin in January, gaining 2.03% (the tech-heavy Nasdaq 100 gained 2.96%). While small caps lost the most ground, major losses for the S&P 500® and the Dow in the last week of the month landed them in the red along with the Russell 2000.

January 2020 US equity performance

FactSet Research Systems

Sector performance sent mixed messages: Utilities and information technology led the S&P 500—two sectors that typically don’t move in lockstep. While tech’s rally continued amid decreased trade hostilities, utilities pulled ahead near month’s end as investors moved into what is typically seen as a defensive area of the market. Energy was the worst performer for the month.

January 2020 sector performance

FactSet Research Systems

International equities

Both emerging and developed markets were boosted by positive trade developments between the US and China—including the Phase-One agreement and the US decision to remove the “currency manipulator” tag from China. But international stocks were also hit hard by the coronavirus outbreak, which has wreaked havoc on travel and raised concerns about global economic growth.

January 2020 international equity performance

FactSet Research Systems

Fixed income

The yield curve flattened significantly in January as interest rates fell in the second half of the month. Longer-term Treasuries were the best performing asset class in the fixed income sector. While high-yield corporate bonds lagged the broad fixed income market, investment grade corporates performed well last month.

US Treasury yield curve, January 31, 2020

FactSet Research Systems

Looking ahead

Earnings season is in full swing, with nearly half of companies in the S&P 500 reporting as of January 31. While earnings are expected to fall for a fourth-straight quarter, 73% of companies to date have topped expectations, and analysts are more optimistic about 2020.1 And despite recent volatility, stocks are still relatively close to their record highs.

Here are a few things we’ll be keeping an eye on:

  • Coronavirus developments. Although history suggests the longer-term market impact of health scares like the coronavirus is limited,2 that doesn’t mean there won’t be more volatility as the story plays out (some companies, and even the Fed, have noted the potential for disruptions to earnings and growth3). On January 30, the World Health Organization (WHO) designated the infection a global health emergency, but also declared confidence in China’s ability to control the outbreak. Bottom line, while there’s no reason for investors to change course, the coronavirus may continue to make headlines in coming weeks.
  • Economy and interest rates. Overall, the first numbers of 2020 suggest the US economy continues to be on solid ground, and while the odds of a rate cut sometime this year may have increased, a wholesale change in the Fed’s stance is less likely. In its decision to leave interest rates unchanged on January 29, the Fed again cited a strong labor market and moderate economic growth. Unless that picture changes significantly (or a major equity sell-off unfolds), chances are the Fed will remain on autopilot.
  • Rich valuations, safe havens, and the need for diversification. With both equities and fixed income near record highs (and gold at a multi-year high), investors may find themselves outside their comfort zone, as traditional “safe haven” markets could offer less benefit in the event of a stock market downturn. Such conditions make diversification more important than ever for long-term portfolio health.  

Thanks for reading, and we’ll talk to you again next month.


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  1. FactSet Earnings Insight, January 24, 2020,
  2. “Sharp and Short-Lived: The Impact of Health Scares on Markets,” January 21, 2020,
  3. CNN, “Fed keeps rates steady, but 'carefully monitoring' coronavirus and global risks,” January 30, 2020,
Mike Loewengart
Managing Director, Investment Strategy, E*TRADE Capital Management, LLC

Mike Loewengart is the Managing Director of Investment Strategy for E*TRADE Capital Management, LLC. Mike is responsible for the asset allocation and investment vehicle selections used in E*TRADE’s advisory platforms. Prior to joining E*TRADE in 2007, Mike was the Director of Investment Management for a large multinational asset management company, where he oversaw corporate pension plan assets. Early in his career, Mike was a research analyst focusing on investment manager due diligence for the consulting divisions of several high-profile investment firms. Mike holds series 7, 24, and 66 designations, as well as the Chartered Alternative Investment Analyst (CAIA) designation. He is a graduate of Middlebury College with a degree in economics.

Andrew Cohen, CFA
Senior Director, Investment Strategy, E*TRADE Capital Management, LLC

Andrew Cohen is the Senior Director of Investment Strategy for E*TRADE Capital Management, LLC. Prior to joining E*TRADE, Andrew was the Director of Investments and Operations for a large Registered Investment Advisor, where his responsibilities included investment manager research, asset allocation, and portfolio construction. Previously, he was a Senior Research Analyst and Team Leader for a leading wealth management platform. He is a CFA® charterholder and a member of both the New York Society of Security Analysts and CFA Institute. He is a graduate of Virginia Tech with a BS in finance.

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