January 31, 5:00 pm EST

With the Fed officially on hold, asset prices continue to lift-off.  But with U.S./China talks concluding today, there was the potential for a spoiler.

Trump quickly stepped in front of that risk this morning, saying that no final deal would be made until he and President Xi meet “in the very near future.”

So the expectations of a final “yea or nay” on a China deal today were managed down. And with that, the recovery in global markets finished the month of January on a strong note.

What a difference a month makes.  In December, people were beginning to worry that collapsing global financial markets would kill the global economic recovery — and maybe fuel another financial crisis.  A month later, and the S&P 500 sits just 2% lower than the close of November (before the December rout).  And in January, almost every market is in the green (from stocks to bonds to commodities to currencies).

 

Remember, if we compare this to last year, cash was the best performing major asset class (returning just less than 2% in dollar terms).

On Friday, we talked about the set up for a big run in commodities this year.  Commodities continue to lead the way.  Crude is up close to 20%on the month.  Copper is up 6% for January (the commodity known to be a early indicator of turning points in the economy), and gold is up 3.5% just in the past week.

We also end the month with another very solid opening to earnings season.  Despite all of the pessimism of the past quarter. The Q4 earnings continue to beat expectations.  Importantly, the widely held tech giants have posted good reports: Facebook, Apple and Amazon.

Importantly, with the expectations bar set low coming into 2019 (for earnings, the economy and a China deal), I’d say we finish the first month of the year in position to exceed expectations on those fronts – thanks, in no small part, to the pivot by the Fed.