Investors can be forgiven for feeling a little motion sickness after a roller-coaster January.
As the dust settled, analysts at Deutsche Bank offered up the chart below, breaking down the performance, in U.S. dollar terms, of major global financial assets last month.
Blame it on the Federal Reserve, and other major central banks, as policy makers signaled they would more aggressively rein in the massive monetary stimulus put in place in response to the pandemic as they now attempt to get a handle on persistent inflation pressures.
A spike in Treasury yields, with the 10-year rate hitting a two-year high near 1.9% before pulling back, helped make the Nasdaq Composite COMP, -0.20%, down 9%, the month’s second-biggest loser. Rising rates were a particular blow for tech and growth stocks — higher yields make the often far in the future cash flows that their valuations are based on less valuable in present terms.
The Nasdaq fell into correction in January, as its slide took it down more than 10% from its record close in November. For the month, the U.S. benchmark S&P 500 SPX, +0.00% saw a negative return of 5.2%.
But it was a rough month for global equities overall, with the worst performance since March 2020 when the first wave of COVID-19 sent stocks plunging, noted Deutsche Bank strategists Henry Allen and Jim Reid, in the note. Credit also struggled on both sides of the Atlantic, they observed, as did traditional safe-haven assets like sovereign bonds and precious metals.
The Nasdaq’s weakness, meanwhile, was surpassed only by Russia’s Micex index RU:MOEX, dogged by worries over Moscow’s intentions around Ukraine — January’s other main market theme, the strategists observed.
In turn, those tensions were good news for oil bulls, though surging crude prices may have unnerved investors in other assets. Brent crude BRN00, -0.08%, up 17.3%, and the U.S. benchmark, West Texas Intermediate crude CL.1, +0.09% CL00, +0.09%, up 17.2%, both saw their strongest gains in 11 months.
Read: How a Russian invasion of Ukraine could trigger market shock waves
After all, Russia is one of the world’s biggest oil exporters, Allen and Reid noted, while adding that the less-virulent nature of the omicron variant of the coronavirus was also a positive as it didn’t lead to major lockdowns and raised hopes that further restrictions on mobility would be avoided.
See: Tensions between Russia and Ukraine aren’t fully priced into commodities
Oil’s gains came despite a surge by the U.S. dollar, which was the top performer among G-10 currencies as the ICE U.S. Dollar Index DXY, -0.16%, which measures it against a basket of six major rivals, jumped to an 18-month high as traders priced in a more aggressive Fed.
The prospect of higher rates and tanking tech stocks did no favor for cryptocurrencies, the chart underlines, with bitcoin BTCUSD, -0.04% falling 17% for its third straight monthly fall, while XRP XRPUSD, +2.17%, down 26.5%, ethereum ETHUSD, +3.08%, down 27.3% and litecoin LTCUSD, +4.60%, down 25.3%, also tumbled.
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