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Market Commentary - January 2019

During January, stock prices recovered as sentiment improved regarding both monetary policy and US-China trade negotiations.  The month began with stocks under pressure. US stock indices started the first session of the year down more than 1%, following the report of weaker than expected economic figures in China.  As the day progressed, Energy shares led the US market back to a modest gain for the day helped along by a 2% rise in crude oil prices.  On January 3, the S&P 500 declined 2.4% as Apple warned it would miss revenue targets due to weak Chinese sales and the ISM Manufacturing report was weaker than expected.  On January 4, the S&P 500 rallied back with a gain of 3.4% as investors were encouraged by stronger than expected jobs creation and comments from Federal Reserve Chairman Powell that monetary policy was flexible and officials were “listening carefully” to financial markets. Stocks trended higher for several sessions, helped along by reports that the IRS would issue tax refunds during the government shutdown, President Trump was eager to strike a deal with China, and China was committed to purchasing more US goods. By the close on January 18, the S&P 500 was up 6.5% for the month overall.  Concerns about US-China trade re-emerged over the long holiday weekend, resulting in a 1.4% decline in the S&P 500 on January 22. Although trading was volatile for several sessions, daily gains and losses were less than 1% until January 30. On the 30th, stocks rallied sharply after the Federal Open Market Committee concluded its meeting and issued a statement that it would be “patient” on future interest rate moves. The rally continued during the final trading session of the month.

Select Equity was held back by its emphasis on stable stocks in a surging market as well as stock specific weakness, principally McCormick and Qualcomm. Large cap quantitative portfolios delivered strong relative results through the entire month, benefitting from optimism regarding US-China trade talks.