Good riddance to a cold January, and I’m not just talking about the weather!
U.S. stocks closed steeply under water today, with Wall Street recording its worst month in years and first monthly loss since August, as investors compiled a list of worries that now include emerging markets.
The S&P 500 slipped more than 3% this month, while the Nasdaq has shed nearly 2%.
Stocks remained in the red through a series of economic data on Friday, with Thomson Reuters/University of Michigan’s final read on consumer sentiment showing a decline in January from the previous month, while the Chicago Purchasing Manager’s Index for January fell 1.2 to 59.6, down for a third month in a row. Data also had personal income up 0.1 percent in December, matching estimates, and spending rising 0.4 percent versus a 0.5 percent estimate.
Emerging markets were in the limelight once again, with the Turkish lira and other currencies weakening further.
The volatility has been sparked by the fact that economic growth is slowing across developing economies and fears that China’s shadow banking system could spark a credit crunch.
The Federal Reserve’s decision to reduce the size of its monthly bond purchase program has also been weighing on emerging markets. The so-called tapering by the Fed is expected to leader to a stronger dollar, which should make emerging markets less attractive for investors.
In a statement Friday, the International Monetary Fund said “the turbulence also underscores the need for vigilance among central banks over liquidity conditions in international capital markets.”
News Sources: CNBC and CNN Money
Such a rare event to see the index futures spike and plunge double digits on multiple consecutive days. Nobody seems to have any sense of direction, but growth does seem to be happening in the US economy, hopefully this is just an excuse to let of some steam from the end of year rally.
Even with the recent volatility, I don’t change my stance that I think we will get at least a short term bounce from here, but we shall see as always, news on emerging markets will dominate in the coming week.
I am just finishing my analysis on the portfolio, I will be phasing out some stocks and replacing them with new growth stocks that I feel will do better for me. So expect to see a few changes in the DPR in the coming days.
Bring on the bulls!