S&P 500 had its best January since 1987 - February 06, 2019

S&P 500 had its best January since 1987

S&P 500 had its best January ever since 1987. The stock index gained almost 8% in just one month. This gain is connected to the Federal Reserve’s patience regarding the rate decisions. In the meantime, more and more analysts believe that the US economy is healthy at the moment, and further advancements on the stock markets are possible.

S&P 500 had its best January ever since 1987, according to the calculation of MarketWatch. Federal Reserve’s decision not to hike rates sent stocks to a final rally on the last day of January, creating an almost 8% rise in just one month.

Fed waits patiently

Due to the Fed’s decision, rates were kept at 2.25%-2.50%. Although this was expected by many, the announcement still gave a nice boost for stocks. Some also expect that thereby rates will remain the same at least until June. We already posted on our blog the words of Fed chairman, Jerome Powell. He said that the US economy is healthy, therefore “the central bank would be cognizant of stresses to financial markets amid rate hikes”.

Federal funds rate history since 2008

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After keeping the rates the same, the Fed also stated that "In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes”. Underlining this patience is a new element of Fed’s communication.

The stocks were already up

Even before the Fed’s decision, stocks were already up significantly. In the middle of January, we already posted about the extraordinary rise that several indices had this year. Dow Jones Industrial Average, S&P 500 and Nasdaq all had their best kick-offs for the year since 2006.

S&P 500's rally in January 2019

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This trend went on longer in January, making it the best year for S&P 500 since 1987 with a 7.87% gain. This is a significant but not unexpected hike. Blackstone’s investment strategist, Joseph Zidle already told CNBC at the beginning of the year that “This is just not a recessionary environment". He also believes S&P 500 will be up 15% this year.

So far, so good

So far, Zidle’s predictions look really nice. Especially if we look at the stock price gains since Christmas Eve last year. Before X-mas, there was a huge selloff on the market, but ever since prices are rising. People who sold their assets during that time missed out a significant, 11.9% profit.

S&P 500's gain since Chrismtas

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Although stock markets perform greatly now, there might be some dips in the upcoming months. This doesn’t mean that prices will tank for long. On the contrary: there’s a good chance that in 2020-2021 new market highs can be reached, but markets are often tested this way. What does this mean for the investors? During these periods, discipline can be rather helpful. What’s more, these small drops can even be great opportunities to dip-buy instruments for further profits.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.