January has been a tumultuous month for the U.S. equities and stock exchange traded funds as the stronger U.S. dollar, overseas uncertainty, continued plunge in oil prices and weaker-than-anticipated earnings season pull on the markets.
Over January, the Dow Jones Industrial Average fell 3.7%, the Nasdaq Composite decreased 2.6% and he S&P 500 fell 3.1%.
The best performing non-leveraged exchange traded products over the past month include C-Tracks on Citi Volatility Index ETN (CVOL) up 20.0%, iShares MSCI Global Gold Miners ETF (RING) up 18% and Market Vectors Gold Miners ETF’s (GDX) up 17%.
The CBOE Volatility Index has been ticking higher over January, ending at around 21, compared to its historical range of about 15 to 20. The increased uncertainty, notably from falling energy, has pushed investors to take a VIX and volatility hedge against potential turns in the S&P 500. [Hedge Against a Volatile Year with VIX ETFs]
Bullion has been strengthening as a safe-haven bet and a store of wealth, lifting gold mining stocks. Additionally, after the Swiss National Bank shocked financial markets by scrapping the franc’s peg to the euro, gold continued to find strength. Ongoing weakness in equities and spike in volatility helped gold assets gain through the month. [What a Week for Gold Miners ETFs]
The worst performing non-leveraged ETFs over the past month include the d Barclays Inverse U.S. Treasury Aggregate ETN (TAPR) down 27.1%, iPath Dow Jones-UBS Natural Gas Total Return Sub-Index ETN (GAZ) down 25.6% and Morgan Stanley S&P 500 Crude Oil Linked ETN (BARL) down 21.7%.
The equities market began the new year by pulling back from the strong end to 2014 on weakness in the Eurozone, the manufacturing sector and further uncertainty with oil prices dipping lower.
Stocks, though, bounced back slightly on upbeat economic news, including an improved job market and stronger consumer sectors. Additionally, global stocks strengthened on expectations that the European Central Bank would launch a quantitative easing program to stimulate the Eurozone economy.
However, optimism was pared down by uncertainty over low inflationary pressures and the Federal Reserves eventual rate hike. Additionally, attention was brought back on to the falling oil prices and potential negative effect on the energy sectory.
Markets bounced on news that the ECB would add a 1 trillion-euro bond-purchasing program to stimulate the region and fight against deflationary pressures. However, poor economic news outweighed the Eurozone’s liquidity boost, keeping market muted.
Overall, the soft economic data, along with tepid fourth-quarter earnings results, kept U.S. equities markets largely depressed over January.
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.