Chart of the Week: January 12, 2016

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It has been the worst start to the year for equity markets since 2008. Risk-off sentiment swept the U.S. market despite positive signs for the economy including a solid employment print, a growing services economy, and more evidence that the Fed will remain dovish through the early stages of the rate hiking cycle. A confluence of global factors triggered the market drop of 5% in the first week of 2016, including a sell-off in Chinese equities, new lows for oil prices, and lowered estimates for global growth in 2016. Investors wonder if the early stumble in the market this year foreshadows a difficult year for markets. The chart of the week shows that January returns do not always predict full year returns, and 60% of the time that January returns are negative, the full-year return is positive. Although blockbuster equity returns associated with earlier stages of the business cycle are likely behind us, consumer strength should continue to fuel growth in the U.S. throughout the year, possibly pushing equities higher and putting the initial market hiccup behind us.

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(Source: JPMorgan)

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