January was a difficult month on many different levels.
Geopolitically, tensions ratcheted up in the Ukraine. Fears of a full blown Russian invasion of Ukraine continued to gain momentum throughout the month, with ever more bellicose language coming from Moscow and rather more mixed messages, certainly not unified, from Western leaders.
On the economic front, inflation remained front and centre in traders’ minds and the Fed appeared focused on rate rises, with Jay Powell, Fed Chair, effectively confirming March for the first this year. Earlier in the month, the Fed’s President of Philadelphia, Patrick Harker, said he would be open to a further three or four US rate rises this year should inflation persist. All of which unnerved markets.
After what appeared to be a strong start to the year as travel and leisure stocks rebounded, the brutal reality soon kicked in, as investor concerns about inflation, rates, war, economic strength or lack of, and a general lack of confidence, resulted in brutal selloffs across markets. Technology and more broadly growth stocks bore the brunt of this selloff, with those stocks that had benefited from lockdown struggling, particularly the likes of Peleton and also Netflix as growth slowed. By mid-month, the VIX was back up over 30, as traders became increasingly risk averse.
Generally, global stocks sold off, with many seeing their biggest falls in more than a year. The S&P 500 closed January down 5.2%, making this the worst month since March 2020 and you have to go back to 2009 for a weaker January. Nasdaq, likewise, had a torrid month and almost had its worst month ever (saved by a final day rally), as growth stocks took a battering, and it posted its worst month since 2008, down 9.0%. The FTSE 100 was an outlier in global indices, with the market closing the month up 1.1%, driven partly by its higher weighting to energy and banking stocks.
Bitcoin was down 20% in January, making this the worst January since 2018. The cryptocurrency only had 11 up days during the month and at one point was as low as $33,000, down from its peak of $69,000 only three months previously. In fact, the malaise went beyond just bitcoin, with most digital assets suffering; a look at TradingView data shows the global cryptocurrency market cap to have fallen from $2.2 trillion to $1.7 trillion.
Oil hit a seven-year high, with Brent Crude breaking through the $90 barrel marker, and closed the month with its biggest monthly gain in a year, with benchmarks generally up around 17%. Natural gas was also up 30%. This was driven by supply concerns, not only from Russia, but also a drone strike early in the month on Abu Dhabi, that saw a scramble for new supplies. Palladium had a strong month, up almost 25% on concerns about Russian supply. But it was lithium, known as white gold, that hit noteworthy highs, having been up 300% last year it was up almost 180% in January. Gold, supposedly the inflation hedge, was marginally down for the month, while silver was down 3.6%.