Hi and welcome to my February monthly market commentary. I’m Nicholas Olesen, Private Wealth Manager and Certified Financial Planner. This month I want to share my thoughts on the pullback we had in the equity markets at the end of January and where that means the market could go from here.
As we always do, let’s first look at how the S&P 500 performed last month. After hitting all-time highs on the last day of 2013, the market looked like it was going to spend January digesting those new highs, but not do much else. Exactly half way through January, we saw stocks finally retouch those all-times high, but that didn’t last for long. As you can see, stocks really fell the last 7 trading days, closing below the psychological 1,800 level. We saw the market close at 1,782.59, or down 2.70%.
If you remember, the bond market, as measured by the 10-year Treasury yield, ended 2013 with the highest yield we had seen since early 2011. January was quite different than 2013, with the yields actually dropping the entire month. The 10-year Treasury closed the month with a 2.67% yield. This drop in yield and rise in price has led some to blame the bond market for some of the drop in equity prices. While I agree that rising bond prices have caused some to shift back to the bond market, as I said in the last commentary, I believe stocks have been due to a rest or small drop.
Before we talk about where the markets could go from here and what the next “resting” places could be, I want to look into the seasonality of the markets and why this last month being down a little doesn’t worry me.
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