The DJIA has now gone 140 trading sessions without a 2% decline for the longest time in 47 years. The S&P 500’s 1.4% January move made it eight months in a row on the upside and that feat has occurred only 10 other times since 1926.The US lagged most of the world’s markets with the MSCI World Index up 1.7% in January, paced by China (+26%), Pakistan (+12%), the Philippines (+8%), and Malaysia (+8%) to name but a few. Even Latin America was up 2.2% in spite of Venezuela’s fall (-15%).
Turning to the question about whether we will see a much anticipated shift to large cap growth stocks, the S&P MidCap 400 posted better results than its large cap brother (S&P 500) with a gain of 3.6% for the month. Moreover, 9 of the 10 MidCap sectors improved with materials being the best performing sector. Energy has firmed since mid January: As the Kiplinger organization noted recently, ‘By 2030, figure on world oil consumption in the neighborhood of 118 million barrels a day, up 40% from today. . . . So no let up in global competition for reliable supplies of oil, natural gas and coal as discoveries of new sources come less frequently’.
The other very noteworthy event in the last couple of weeks was the strong move in the Dow Jones Transports even as crude rallied over 6%, pointing firmly to the stronger economy thesis with the resulting delay in the much anticipated Fed rate cut that would have marked the end of this round of tightening. But overall, the macro picture in the US cannot be described as clear, and further data is needed to discern more clearly the medium term direction of the economy. Longer term, the major trends are clear and look very entrenched, with emerging major economies remaining the most important factor over the next 5-10 years.
