Well, that was some month. After what was just a miserable start to the year for risk assets in the first three weeks of January, a late month rally helped to avert a complete disaster. As shown in our ETF Matrix below, with the exception of Utilities (XLU) and Consumer Staples (XLP), equity related ETFs were down across the board. Since the Fed hiked rates last December, only XLU is up! In the words of Warner Wolf, if you had equities rallying after the Fed hiked rates, you lose! As one might expect, in an environment when risk assets fall out of bed, the relative safe-haven of fixed income has rallied. In fact, all six fixed income ETFs are up since the Fed hike in December, up on the year, and up since the January lows.
Since the January 20th market low, we have seen some interesting action. Small cap stocks have seen mixed returns with the Russell 2000 ETF (IWM) underperforming the S&P 500, while the S&P 600 ETF (IJR) has outperformed slightly. Sector returns off the January lows are even more interesting. While you would expect cyclicals to lead the way higher, three of the five sector ETFs that are up 5% since the 1/20 low are all defensive (Consumer Staples- XLP, Telecom Services- IYZ, and Utilities- XLU).
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