January May Have Been A Goldilocks Month, But March Madness May Be Coming

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by: Russell Investments
Summary

What was behind January's remarkable recovery?

Jobs numbers and earnings season: Why the market liked them.

March Madness: China trade, Brexit, and U.S. debt ceiling deadlines.

On the latest edition of Market Week in Review, Director of Client Investment Strategies, Mark Eibel, and Sophie Antal Gilbert, head of AIS business solutions, discussed the reasons behind January's market recovery and what may be coming in China and Europe in the months ahead.

January: The Goldilocks month?

Eibel recalled the declines in markets in the fourth quarter and noted that while some sort of bounce was expected, "I don't think we all thought it would happen in one month."

Eibel also reflected on the U.S. earnings season. He stated, "I think the markets wanted to see what was expected, which was nice, solid, low-double-digit earnings."

A big number that grabbed Eibel's attention was the U.S. jobs figure, as reported by the Bureau of Labor Statistics (BLS). Eibel noted that for the month of January, the U.S. economy added over 300,000 jobs. He noted that when combined with December's revised BLS jobs numbers, "that's over 500,000 jobs in two months. That looks very healthy."

Regarding the Fed, Antal Gilbert noted that it decided not to raise interest rates. "If anything," commented Eibel, "the Fed reaffirmed more of a dovish stance. We feel that they'll be at one rate hike for the rest of the year."

Not all January news was so rosy. On the negative side, Eibel noted that U.S. housing numbers and manufacturing numbers both came in "a little weaker," which may have influenced the U.S. Federal Reserve (the Fed) in its most recent announcement.

"When you add it all up, it almost feels again kind of like a Goldilocks set-up of enough good news to combat the bad news." Eibel recommended that for clients looking at their fourth-quarter statements, they might want to look at the last four months, including January. "They might feel a little bit better about the numbers that they see."

March Madness

With January in the rear-view mirror, Eibel looked ahead and noted that Brexit, China trade talks, and the U.S. debt ceiling all have decision deadlines coming in the month of March. "There's March madness," said Eibel. "If you're a basketball fan and you like the NCAA tournament, I would recommend you watch a lot of basketball and less other news in March." On the positive side, Eibel noted that European markets have rallied just as well as the rest of the world. He said: "Earnings have come in nicely, so I think the day-to-day fundamentals are fine." Eibel mentioned that the political overlay in Europe continues to deserve attention.

Rams or Patriots?

Finally, on a lighter note, when asked for his prediction on this weekend's Super Bowl in the U.S., Eibel answered through an economist's lens: "My heart's with the Rams. My head's with the Patriots. So maybe I'm hedging my bets a little bit there."