Good morning,
The first three weeks of January have delivered more than their share of attention-grabbing headlines—from the White House, the weather, and moves in gold and currency markets. Yet none of this has meaningfully disrupted either stocks or bonds.
With one week left in the month, equity markets are modestly higher across the board. Month-to-date, the S&P 500, Nasdaq, Russell 2000, EAFE (International Developed), and Emerging Markets are up approximately +1.10%, +1.13%, +7.58%, +3.60%, and +6.94%, respectively. Last year’s trend of foreign-market outperformance remains intact.
The Russell 2000’s outsized gain, however, may be less indicative of a durable trend change than it appears at first glance. The combined market capitalization of the 2,000 small-cap companies in the index is roughly $5.5 trillion—meaning the market value of just the ten largest companies in the S&P 500 is more than five times larger. In other words, it doesn’t take much capital flow to move small-caps in a noticeable way.
Looking ahead, the coming week is all about earnings. More than 300 companies report results, including four mega-caps—Microsoft, Meta, Apple, and Tesla. There is also a Federal Reserve meeting, though no policy surprises or rate changes are expected.
Have a good week, and I’ll see you Friday.
Mike