Welcome back to the Monthly Market Wrap from YCharts, where we break down the most important market trends for advisors and their clients every month. As always, feel free to download and share any visuals with clients and colleagues, or on social media.
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January 2023 Market Summary
Stocks started the year off strong with the NASDAQ leading the way for US equities. After a largely sour 2022 for the growth-heavy index, it soared 10.7% higher in January, while the small-cap Russell 2000 also jumped 9.8%. The widely-tracked S&P 500 advanced 6.3%, though January was relatively underwhelming for blue chips, as the Dow Jones Industrial Average rose 2.9%. Nonetheless, equities were off to the races across the board (and world) in January.
Eight of the 11 S&P 500 sectors were higher in January. After an 11.4% decline in December, the Consumer Discretionary sector went from worst to first in January, logging a 15.1% gain. Communication Services was not far behind with a 14.8% increase. At the bottom of the list were the less economically-sensitive sectors of Consumer Staples, Health Care, and Utilities, as investors largely went risk-on.
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Off the YCharts! Starting the Year Off Right
January was certainly a solid start for stocks, regardless of their shapes and sizes. The month was so good, in fact, that January 2023 has made the S&P 500’s All-Time Top10 highlight reel.
Looking at S&P 500 monthly returns since 1951, January 2023 stands as the ninth-best start to any year. It’s quite the rebound from last year, considering 2022 produced the seventh-worst January in the last 70+ years.
Small-cap value and growth stocks, represented by the iShares Russell 2000 Value (IWN) and Growth (IWO) ETFs, each surged nearly 10% in January. Large-cap Growth (IWF) was not far behind with an 8.3% pop, and Large-cap Value (IWD) also managed to finish 5.1% higher.
Zooming out, January was a big help to stocks as lookback returns became a lot less negative. Both Large and Small-cap value stocks ended the month within 1% of being back to even on a TTM basis. Large-cap growth exited bear market territory, and Small-cap Growth is now just -6.3% in the last 12 months, as of January 31st.
December’s unemployment rate fell back to a pre-pandemic low of 3.5%. The labor force participation rate notched up 0.1 percentage points to 62.3%, though labor force participation is still 1.1 points below its February 2020 high. 223,000 jobs were added in the final month of 2022, topping nonfarm payroll expectations of 200,000 and bringing the aggregate total jobs created in 2022 to 4.5 million.
Gold started the year strong with a 6.0% gain in January, bringing its price to $1,923.10 per ounce as of January 27th. Oil price movement was mixed in January—the price of WTI per barrel declined 2.7% to $77.97 while Brent increased 2.2% to $84.61. Nonetheless, prices for both WTI and Brent are more than 36% lower than their highs set in March of last year. Trips to the pump did get more expensive in January, as the average price of regular gas rose 39 cents (12.2% MoM) to $3.59 per gallon.
As we pointed out in our recent Economic Update Webinar covering Q4 2022, Bitcoin and Ethereum each tumbled around 65% last year. However, Bitcoin surged 37.2% in January and Ethereum jumped 30.6%. Is this a signal that the worst is over for crypto, or just another hill on the crypto-coaster?