January 2023 Monthly Review
The change in the calendar year led to changes in the markets. After a brutal year for stocks and bonds, the move to 2023 led to strong stock gains in January. After a challenging December, the SPX made up some of the losses and was up 6.18%. This marked the 3 rd monthly gain of the last four. Beta was also strong, with the Russell 2000 small-cap index up nearly 10% for the month. The consumer discretionary, technology, communication services, and real estate sectors led the way for the month. These were the four worst-performing sectors in 2022. Therefore, much of January’s moves seemed to be short covering driven by declining rates. 10yr rates were down 37 bps, and, more importantly, 2yr rates saw their largest monthly decline since 2020. This move lower caused the largest drop in rates vol since early 2020. Credit was strong for the month, with IG up 5%. Mean reversion in assets had a large impact on factors as pure momentum had its largest monthly drop since April 2009, coming out of the GFC. Meanwhile, beta outperformed profitability for its best monthly performance since the summer. Value outperformed growth for the 4 th month in a row.
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