January Effect in the Making?

Monday, January 8, 2018 – It’s no surprise that stocks started the year on a positive note, with the major U.S. market indexes reaching record highs. The Dow Jones Industrial Average spiked over 25,000 for the first time and the S&P 500 recorded its best weekly performance in over a year. International markets also participated in the rally, adding to their overwhelmingly strong 2017 performance. However, from an economic perspective, job gains in December were well below expectations, counterintuitive to the corporate infusion we saw a few weeks back. Fortunately, the three-month average still exceeds 200,000 and the unemployment rate (4.1%) remains at a 17-year low, reflecting the ongoing health of the labor market. This, along with two consecutive quarters of GDP growth above 3%, provides a solid fundamental backdrop to support the continued bull market. This bullish sentiment extended the gains of 2017 and the results have ultimately been predictable.

As a cold snap blanketed much of North America this past week, Energy and Materials were among the best performing sectors.  Also of note was the renewed strength in the technology space. Looking at specifics, energy stocks heated up Canada’s S&P/TSX Composite and helped push the index which saw new highs in each of the year’s first three days. The firming growth backdrop also nudged up government bond yields in major markets, including Europe, where yields stepped even higher after comments from European Central Bank executives suggested the ECB’s bond repurchase program may not be continued this year. Rising global bond yields added to pressure on the U.S. dollar, which has been weakening for the last three weeks. On the final day of 2017 West Texas Intermediate oil (WTI) climbed above $60-a-barrel following a pipeline explosion in Libya. We haven’t seen these prices since 2015, a truly unfortunate event considering consumers feel pressure of rising costs, low wages and bitterly cold temperatures!

ETF Global Quant Movers - Notable gainers were ETRACS Alerian MLP Infrastructure Index ETN and WBI SMID Tactical Growth Shares both saw changes of 12.5 and 9.5 respectively within the Quant Score.

ETF Global Model Portfolio - As some may have seen, theses Model Portfolios have recently rebalanced with several new products including The PowerShares FTSE International Low Beta Equal Weight Portfolio and The iShares Edge MSCI Multifactor Intl ETF both products are consistent winners within ETF Global Weekly Select List.

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