February 2, 2023

The US stock market experienced strong gains in January as investors poured money into last year’s losers, while crossing their fingers and hoping that the Federal Reserve (“Fed”) would soon “ease up” on interest rate increases. This change in sentiment appears to be driven by a more optimistic outlook on disinflationary signals in the economic data, bolstering the case for a possible soft landing.

The S&P 500 index gained 6.3% for the month. The NASDAQ gained 11.0%, the best January gain since 2001, led by big technology companies. Discretionary (+15.0%) and Communications Services (+14.5%) were the best performing sectors in January while Utilities (-2.0%) and Health Care (-1.8%) were the worst sectors. From a style perspective, growth was better than value across all market-cap ranges. Small-cap stocks were the strongest performers versus mid-cap and large-cap stocks from a market-cap perspective.