News

Markets in January had to reconcile several high profile headlines and increased volatility.  Most headlines emanated from Europe this month including a bond buying (QE) program by the ECB, a surprise currency policy shift by the Swiss national bank (SNB), and a victory by Euroskeptic party, Syriza, in Greece.

The announcement of an opened ended QE program (€60b per month) in Europe was the most important development impacting markets. International stocks and European sovereign debt both posted gains on the month in response to the aggressive policy action by the ECB.  The unexpected removal of the euro exchange rate ceiling on the Swiss franc caused the franc to skyrocket with global ramifications on currency brokers and businesses dealing in Swiss francs.  Greece took center stage again with new Prime Minister, Alexis Tsipras, striking a hard line on the Troika bailout package austerity measures and their impact on the Greek economy.  The bailout plan expires in late February and another restructuring of Greek debt and the austerity pact are officially on the table.

The S&P 500 posted a consecutive monthly loss. Energy and financials stocks weighed on the market while defensive sectors of utilities and healthcare led the way.  Primarily due to energy and financials results, U.S. 4Q earnings have been somewhat disappointing. Half of S&P 500 companies reporting thus far with revenue and earnings growth of ‐ 0.39% and 3.52%, respectively.  Earnings guidance and analyst revisions have been tapered as well.  The strong dollar and weak Euro‐Yen have begun to pressure U.S. overseas earnings.  On the back of a 5% 3Q14 GDP figure, 4Q14 GDP came in under forecasts at 2.6% but did reflect robust consumer spending.  UST bond yields and oil prices plummeted again in January.  Six consecutive months of oil price declines and a 10yr UST yield of 1.64% are leaving inflation hawks little to worry about for the time being.