Well, that was a month to forget, red ink everywhere in equities (especially emerging markets) and commodities (gold did OK, but not brilliantly), but not in bonds.
For those experts who told us at the start of the month that this was not going to be a good year for bonds, January has proven them to be very wrong.
Perhaps it was the emerging markets problems that sparked a flight to quality mid month, but whatever, the US economy’s gathering strength should have seen bonds sold off as investors fretted about the Fed’s taper and a rate rise in 2015.
But the opposite happened.
On Friday the world’s key indicator, the yield on 10 year US bonds fell to 2.649%, which was lowest since early November. It was over 3% in early January.
This year global benchmark saw the yield fall 0.36% over the month – which was followed by key bonds in Germany and Australia where the yield on our 10 year securities ended down 0.33% at around the 4%.
So can bonds continue to shine?
Well, it depends how long the problems in emerging markets continue. I reckon that for as long as the Fed cuts its spending this year, emerging markets will bounce around, and that will make bonds of highly rated countries more interesting to worried investors.
But watch for the tensions with the positive state of the US economic recovery. Eventually, if the good news continues to flow, US bond yields will start rising back towards 3%.
After all, if you are taking your money out of an emerging market and want to protect it, where better than in bonds in US dollars, euros (German and UK bonds) and in countries such as Australia.
But for equities, the year has started deeply in the red.
For January, the Dow lost 5.3% the S&P 500 slid 3.6% and Nasdaq shed 1.7% (because US investors think tech stocks, especially the likes of Twitter and Facebook, are the place to be).
The January loss followed the S&P 500’s gain of 30% surge last year.
Reuters said it also marked the first time that the S&P 500 ended January with a loss since 2010, when the main global index started the year with a drop of 3.7%.
For last week, the Dow fell 1.1%, the S&P 500 .4% and the Nasdaq lost 0.6% of its value.
Weak start to 2014 for US Markets
In Australia, the ASX 200 Index fell 162.2 points, or 2.9%, to end the month at 5190.
That was the worst January for four years, as the big four banks and resources giant BHP Billiton led the losses.
On Friday the index added just 1.9 points, but the market ended the week down 1%, fourth straight week of losses.
And February will start today on the back foot with the futures market predicting a weak opening and a loss of 23 points.
European markets ended January with their worst monthly loss since June on Friday.
The Stoxx Europe 600 index dropped 0.3% to end at 322.52, closing 0.7% lower on the week and losing 1.8% on the month.
In London the FTSE 100 index 2.3% for the week and 3.5% for the month; France’s CAC 40 index added 0.1%, but lost 3% in January. Germany’s DAX 30 index dropped 0.9% for the week and 2.6% for the month.
So does a weak January presage something similar for the rest of the year?
The AMP’s Dr Shane Oliver wrote in his weekly note that "with January seeing shares fall 3.6% in the US and 3% in Australia it hasn’t been a great start to the year leading some to conclude this means a bad year based on the so-called “January barometer”.
"This basically says that “as goes January for shares, so goes the year," but its track record is messy," Oliver points out.
"For the US S&P 500 there have been 22 positive Januarys since 1980 of which 19 saw positive years, indicating an 86% hit rate. But the hit rate for negative Januarys (of which there were 12) going on to negative years was only 42%.
"It’s the same for Australia – since 1980 there have been 20 positive Januarys for the All Ords of which 15 saw positive years, giving a hit rate of 75%.
"But of the 14 negative Januarys since 1980 only 5 saw negative years resulting in a hit rate of 36%.
"So while a positive January augurs well for the rest of the year, the fact that January has been negative doesn’t tell us much at all. In fact negative Januarys have more often than not gone on to see positive years.
"In both Australia and the US, Januarys in 2003 and 2009 saw shares fall but both years had solid returns," he added.
Our market was led lower by the very stocks that helped produce the 14% gain in 2013, the banks and big miners.
The big four banks started 2014 lower, a very different outcome to their stellar 2013 showing.
The Commonwealth Bank fell 4.2% to $74.23 over the month, Westpac Banking Corporation lost 3.9% to $30.87; the NAB fell 3.8% to $33.25, and ANZ Banking Group stood out, sliding 5.9% to $30.13.
Some retailers stood out with weak performances. Shares in downgraders such as The Reject Shop plummeted 35.3% to $11.20, while Super Retail Group, owner of the Supercheap Auto chain, slumped 19.4% to $10.71. But JB Hi-Fi, which produced a solid bit of guidance last week, still fell 15% over January to $18.
BHP Billiton fell 3.1% to $36.57, while main rival Rio Tinto lost 3.6% to $65.64 despite solid production reports.
For those losses blame the falling spot price for iron ore, which fell from $US134.20 a tonne to $US122.60 a tonne.
And in the rest of Asia, the Tokyo market stood out with a big loss – 8.5% for the Nikkei.
Among commodities, gold fell 1.9% for last week, but ended just over 3% higher for the month at $US1,239.80 for Comex April gold.
Comex March silver ended at $US19.12 an ounce, down 3.3% for the week and 1.3% for the month (the link with gold seems to have been broken for the time being).
Comex March copper fell 2.3% last week (the weak China data didn’t help) and 5.8% for January (the same reason).
US crude oil futures for March delivery settled at $US97.49 a barrel on the New York Mercantile Exchange, adding just 1% for the month, but losing around 1% for the month.
In London Brent crude lost 1.3% last week and 3.9% for January as the spread with West Texas style crude in the US narrowed somewhat.
The drought in parts of Western US saw live cattle futures end January with a 4% gain over the month.
