January 2023 Market Review

A look back on markets in January when stocks posted strong gains.

The month in summary:

Stock markets started 2023 on a strong footing with gains across global equities. China’s re-opening after dropping the zero-Covid policy in late December helped propel the advance. Signs that inflation is easing from its autumn highs in several major regions also supported sentiment, amid hopes central banks may be close to the peak of their rate hiking cycle. Emerging markets outperformed their developed counterparts. In fixed income markets, bond yields fell (meaning prices rose). Commodities saw a negative return for the month. 

Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.


US equities made robust gains in January. Investors’ focus on inflation – which cooled for the sixth successive month in December – remains sharp. The headline consumer price index (CPI) dropped to 6.5% from 7.1% mainly due to energy and food cost moderation. In combination with a stronger-than-expected GDP print of 2.9% (seasonally adjusted annual rate), the inflation data led investors to position for slower rate rises from the Federal Reserve from here. Risk appetites picked up, despite expectations of a slightly softer earnings season compared to Q4 2021.

Economic data elsewhere was mixed but encouraging. Industrial activity – as measured by the S&P Flash Composite PMI – improved somewhat in January (to 46.6 from 45.0) but remains in contraction territory. (The PMI indices are based on survey data from companies in the manufacturing and services sectors. A reading below 50 indicates contraction, while above 50 signals expansion.) Employment data was more supportive, with weekly jobless claims below expectations. At 186,000, the weekly jobless claims was the lowest since April and well below expectations of 205,000.

The reversal in sentiment touched the majority of the market, with almost all sectors stronger over the month. Traditionally defensive areas of utilities, consumer staples and healthcare, were snubbed in favour of more growth oriented names. The strongest gains were linked to tech or consumer discretionary spending. Travel and auto stocks were amongst the month’s strongest gainers, while entertainment and media stocks also advanced. 


Eurozone shares were among the best regional performers in January. Top performing sectors included economically-sensitive areas of the market such as information technology and consumer discretionary. Real estate also enjoyed a rebound after poor performance in 2022. Within consumer discretionary, luxury goods stocks were particularly strong following the news of China’s economic reopening. Energy was the weakest sector while defensive areas like utilities and healthcare also underperformed.

Eurostat data showed the eurozone economy eked out 0.1% of growth quarter-on-quarter in Q4, a slowdown from 0.3% growth in Q3. Forward-looking indicators raised hopes that the eurozone may continue to avoid recession. The flash eurozone composite purchasing managers’ index for January registered a seven-month high, coming in at 50.2 after 49.3 in December.

Inflation edged lower again in December. The annual inflation rate was 9.2% compared to 10.2% in November. The highest contribution to inflation came from food, alcohol and tobacco, with energy in second place as natural gas prices remained below their elevated levels of 2022. European Central Bank President Christine Lagarde warned that further interest rate rises would still be needed to return inflation to the 2% target.


UK shares posted gains in January although the advance was more muted than in some other regions. The consumer discretionary and financials sectors were among the top gainers. Laggards included more defensive sectors such as consumer staples and healthcare. Economically sensitive areas of UK equities outperformed in line with other markets. This occurred amid growing hopes that the US Federal Reserve might be in a position to ‘pivot’ to cutting interest rates in late 2023.

UK small and mid cap equities (smids) outperformed as domestically focused consumer stocks did particularly well, partly amid signs the UK economy is holding up better than expected. Consumer stocks generally delivered much more encouraging trading updates than had been feared. When combined with very low expectations this drove some very strong share price performances from the retail, travel & leisure and housebuilding sectors. Domestically focused banks also performed well, although more broadly the banking sector benefited from its emerging markets exposure amid China reopening hopes.

Recent UK macroeconomic data  suggested underlying growth has been more resilient than previously thought, partly helped by an easing of energy prices, driving hopes for a milder-than-feared recession. The latest updates on monthly GDP for November revealed that the UK economy unexpectedly grew in November, expanding by 0.1%.


The Japanese stock market rose throughout January, reversing the decline seen in December. The total return for the month was 4.4% in local terms. The yen initially strengthened against the US dollar, in line with the trend seen from November, before giving back some of the gain in the second half of the month.

Investors’ attention remained focused on the Bank of Japan, following the surprise adjustment to the yield curve control policy which was announced in mid-December. In early January, with 10-year bond yields testing the Bank of Japan’s new upper limit, there was some speculation that more changes could be made at the January policy committee meeting. In the event, policy was left unchanged and discussion moved instead to the likely candidates to replace Mr Kuroda as governor of the Bank of Japan. The prime minister, Mr Kishida, is likely to nominate the new governor in the first half of February.

The debate continued over inflation and whether it will be sustained at a level above the Bank of Japan’s 2% target. Preliminary surveys of the spring wage negotiations suggest that moderate wage growth is probable, but it may not be sufficiently high to provide a definitive trigger for any policy change at the central bank.

At the very end of January, the corporate results season began for the quarter ending in December. Only a minority of companies had reported before the end of the month. Early indications suggest a positive tone, especially as service companies should see a benefit from improved demand after the final lifting of Covid restrictions and a resumption of travel subsidies.

Asia (ex Japan)

Asia ex Japan equities recorded a positive performance in January. Chinese shares achieved robust gains after Beijing loosened its Covid-19 restrictions that have constrained the country’s economic growth since early 2020. Government measures to support the country’s property market and a loosening of the regulatory crackdown on China’s technology companies also bolstered investor sentiment.

Other Asia Pacific markets also gained after Hong Kong and China resumed quarantine-free travel, signalling the end of China’s zero-Covid policy which had kept borders closed for nearly three years. Shares in South Korea and Taiwan achieved significant growth in the month on renewed investor optimism, while gains in Hong Kong were slightly more muted. In Hong Kong, technology, travel and consumer stocks were particularly strong. Singapore also ended the month in positive territory after an upbeat global forecast for Asian markets helped allay investor fears of an economic slowdown. Property, financial and industrial stocks performed particularly well in the month.

The Philippines, Thailand, Indonesia and Malaysia also achieved solid growth. India was the only index market to end the month in negative territory, amid a sell off by foreign investors and investor caution as economic growth stalls.

Emerging markets

Emerging market (EM) equities benefited from January’s risk-on environment. Signs of cooling inflation in the developed world fuelled optimism that interest rates may soon peak, with potentially positive consequences for growth. Developments in China also boosted investor sentiment. These included the ongoing re-opening of the economy, easing of regulatory pressure on the internet sector, more policy support for the real estate sector and better-than-expected Q4 GDP growth of 2.9% year-on-year. The MSCI EM Index outperformed the MSCI World Index over the month.

Czech Republic was the best-performing index market as a state-owned power utility company rallied strongly. Mexico followed close behind, despite a slowdown in economic activity indicators, including weaker manufacturing data, and a slight rise in inflation. Meanwhile, Taiwan and Korea both outperformed, supported by strong returns in their tech sectors, as the outlook for global growth and trade improved. Chile and Peru performed better than the index too, helped by higher copper prices as optimism about China’s re-opening drove industrial metals prices higher. While Hungary was ahead of the index, and Poland, just behind, both markets continued to rebound following months of poor performance in 2022 after Russia’s invasion of neighbouring Ukraine.

Brazil underperformed. Macroeconomic data softened while inflation rose and anti-government riots in Brasilia, the country’s capital, damaged government buildings. South Africa lagged the index amid an ongoing energy crisis, with the state-owned power supplier announcing permanent rolling blackouts for at least the next two years. Thailand, Indonesia and Malaysia posted returns behind the index, as did Qatar and Saudi Arabia, with the latter two impacted by generally weaker energy prices.

India generated negative returns amid allegations of fraud and share price manipulation at a major conglomerate. Turkey was the biggest underperformer as investors booked profits after very strong returns in recent months.

Global Bonds 

Global government bond yields fell in January (i.e. prices rose) on encouraging news on inflation – particularly out of the US. The month was light on central bank meetings, but the market began anticipating a slower pace of rate hikes by the Federal Open Market Committee (FOMC). The Bank of Canada hiked rates by 25 basis points (bps) but signalled a pause in its hiking cycle, while the Bank of Japan made no further adjustments to its yield curve control policy, despite a sharp rise in core inflation. 

Credit markets did well and outperformed government bonds both in the US and Europe and across both high yield and investment grade markets. (Investment grade bonds are the highest quality bonds as determined by a credit rating agency; high yield bonds are more speculative, with a credit rating below investment grade.) Risk sentiment improved as signs of moderating inflation and better-than-expected growth (especially across the eurozone and China) saw investors dial back some of their worst recessionary fears.

Meanwhile activity data in the US pointed to further weakness. The better-than-expected fourth quarter GDP was driven by a significant build up in inventories, while other near-term and forward looking indicators, including retail sales and industrial production, fell.

Headline inflation rates in both the US and the eurozone continued to ease, driven by retreating energy prices. While there was a modest uptick in month-on-month US core inflation, the general disinflationary trend here is clear. In contrast, core inflation across the eurozone has remained sticky and is likely to prompt a further hawkish response from the European Central Bank (ECB).

The US 10-year yields fell from 3.88% to 3.51%, with the two-year falling from 4.42% to 4.21%. Germany’s 10-year yield declined from 2.57% to 2.29%. The UK 10-year yield fell from 3.67% to 3.34% and 2-year dropped from 3.56% to 3.46%. 

The US dollar was weaker against most other developed market currencies. The Australian dollar was the strongest performer among G10 currencies, following much stronger than expected inflation and supported by optimism around China’s re-opening. There was broad-based strength across emerging market currencies, given indications that US interest rates would soon peak.

Convertible bonds benefitted from the equity market tailwinds, but once more failed to convince in their upside participation. The Refinitiv Global Focus gained 4.8% in US dollar terms, lagging the advance of the MSCI World index. January turned out a good month for primary market activity. We saw USD 5.4 billion of new paper was issued with a good regional split between the US and Europe. Convertibles are trading about 1% below their fair value with Asia remaining the cheapest region.


The S&P GSCI Index recorded a negative performance in January. Energy and livestock were the worst-performing components of the index, while industrial metals and precious metals achieved strong gains. Within energy, the price of natural gas was sharply lower in the month, Within industrial metals, the price of lead fell in January, while zinc, aluminium and copper all achieved robust gains. Within agriculture, wheat and cocoa prices fell in January, while sugar and coffee recorded significant price growth. Within precious metals, the price of gold was significantly higher than a month earlier, while silver fell back slightly.

The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

Weekly Bulletin: US Payroll Report

Rick Rieder, BlackRock Chief Investment Officer of Global Fixed Income, on what the US payroll report says about the economy

“There are certain payroll reports where we might think about repositioning portfolios, but this is one isn’t one of them. There are other things in the world that are more important. What we need to know is whether we are continuing the current growth path. In that respect, these numbers are impressive.”

“The Federal Reserve can, to some extent, sit back and put its feet up. There’s nothing to do from the central bank’s perspective. The US economy is operating extremely well and is in good shape. It is a notable contrast to the German data that also emerged this week, which saw the greatest rate of descent in their economy since 2009.”

Week Past

British Retail Consortium – There was scant evidence of the so-called ‘Boris bounce’ in the British Retail Consortium’s retail sales figures for January. Total sales rose 0.4%, but this was driven by retailers adding space.1

UK economic data – The UK economy saw no growth in the final three months of 2019, even though more recent surveys have suggested an improvement in economic conditions. Office for National Statistics (ONS) figures for the fourth quarter showed manufacturing contracted for the third quarter in a row and the service sector also slowed. The economy grew by 1.4% overall in 2019.2

US Institute for Supply Management (ISM) non-manufacturing PMI (January) – The ISM index rose to 55.5 in January, higher than expected, reflecting a more optimistic outlook for manufacturing after the US/China trade deal. It was the highest level since August.3

US initial jobless claims – The number of Americans claiming unemployment benefit dropped to a nine-month low, with initial claims dropping to 202,000. This continues to be a strong support for the US economy.4

Coronavirus – The virus continued to spread across the world, with more than 40,000 people infected in China alone and cases reported in many other countries. It continues to hit Chinese stock markets, the travel sector and energy funds.5

Week Ahead

US inflation (January) – US consumer prices are slated to rise 2.4% year on year and 0.1% month on month, while ‘core’ inflation is due to rise 2.2% year on year and 0.2% month on month.6

Eurozone Gross Domestic Product (GDP) (Q4, preliminary) – Growth continues to be sluggish across the Eurozone, in spite of some revival in the German economy. Year on year growth is expected to be 1%, while quarter on quarter growth is expected to have slowed to 0.1%.6

US retail sales (January) – The US consumer continues to be the engine of the economy, as employment and wages grow. Retail sales are expected to rise 0.3% month on month.6

UK wages and unemployment – UK jobs growth and wages have continued to defy a weakening economy. Economists are expecting wage growth to continue to outpace inflation.7


  1. British retailers yet to benefit from ‘Boris bounce’, says BRC, The Guardian, February 2020
  2. UK economy saw zero growth at the end of 2019, BBC, February 2020
  3. US services sector growth picks up in January, CNBC, February 2020
  4. US weekly jobless claims drop to a 9-month low, CNBC, February 2020
  5. Coronavirus mapped: the latest figures as the outbreak spreads, Financial Times, February 2020
  6. IG Index, week ahead, January 2020
  7. FX Street, Economic Calendar, January 2020

The opinions expressed are as of February 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.

Weekly Bulletin: Thawing Trade Tensions

Elga Bartsch, Head of Macro Research for the BlackRock Investment Institute

“The base case is that growth is going to pick up and edge a little higher this year and that means that the recovery remains intact. There are a number of reasons why growth is going to get better: The first is that thawing of trade tensions between the US and China, but also the material easing in financial conditions seen last year on the back of the pivot towards easing by central banks around the world.”

“In terms of the macroeconomic outlook there are two main risk scenarios to consider. One could be that we are too cautious on the recovery gaining momentum in 2020, so that growth is materially stronger than expected and without any material pick-up in inflation pressures. This would be a ‘Goldilocks’ scenario.”

“The second risk is that we are too optimistic on growth and instead, we’re overlooking material inflation risks that could be building, especially cost pressures. That could end up in a mild stagflation. This usually happens if you have a deterioration on the supply side of the economy, which coincides with a material slowdown in productivity growth.”

Week Past

Brexit – the UK formally left the European Union on 31 January, triggering a war of words. Prime Minister Boris Johnson said there was no need for the UK to follow EU rules on trade.1

Bank of England rate decision and inflation report – Although there had been talk of a potential interest rate cut, the Bank of England left rates unchanged at 0.75%. However, the Monetary Policy Committee (MPC) estimated Britain’s economy would only grow at 1.1% on average over the next three years.2

Federal Reserve rate decision – The US Federal Reserve officials left interest rates unchanged at 1.5% to 1.75% at their first meeting of 2020. Jerome Powell said the economy was solid, particularly jobs growth and consumer confidence, but global risks remain.3

US and Eurozone gross domestic product (GDP) – Eurozone growth was just 0.1% in the October to December quarter over the previous quarter, confounding expectations of a bounce-back.4

US growth – US growth was in line with market expectations for the fourth quarter, at 2.1%, but behind White House expectations. Full year growth of 2.3% was below 2.9% in 2018 and 2.4% in 2017.5

Chinese manufacturing and non-manufacturing Purchasing Managers’ Index (PMI) (January) – China’s manufacturing sector showed signs of life, with the PMI index hitting 50 for January, in line with expectations. However, the statistics do not consider the impact of the coronavirus.6

Week Ahead

UK budget – The Chancellor Sajid Javid has said the new Budget will set out “ambitious plans to unleash Britain’s potential, level up across the UK and usher in a decade of renewal”, but he faces some tough choices as lower growth gives him less room for manoeuvre.7,8

British Retail Consortium – The Christmas period was tough for retailers, but retail sales are expected to be stronger in January, up 1.7% year on year.9

UK data – UK services and industrial production, plus fourth quarter economic growth statistics come out this week, giving a snapshot of the strength of the UK economy and whether the post-election bounce can be sustained.10

US Institute for Supply Management (ISM) non-manufacturing PMI (January) – the index is expected to rise to 55.1 from 55, reflecting a more optimistic outlook after the US/China trade deal.9

US initial jobless claims – claims are expected to rise to 219,000 from 216,000.9


  1. Brexit: Boris Johnson says ‘no need’ for UK to follow EU rules on trade, BBC, February 2020
  2. Bank of England holds rates but cuts growth forecast, Financial Times, February 2020
  3. Fed Leaves Interest Rates Unchanged, New York Times, February 2020
  4. Eurozone growth slows sharply as French and Italian economies shrink, the Guardian, February 2020
  5. Fourth-quarter GDP rose only 2.1% and full-year 2019 posts slowest growth in three years at 2.3%, CNBC, February 2020
  6. China says its manufacturing PMI came in at 50.0 for January, as expected, CNBC, February 2020
  7. Chancellor launches Budget process to usher in ‘decade of renewal’, UK Government, January 2020
  8. Sajid Javid’s surplus goal at risk as UK finances face £12bn black hole, Financial Times, February 2020
  9. IG Index, week ahead, January 2020
  10. FX Street, Economic Calendar, January 2020

The opinions expressed are as of February 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.

Weekly Bulletin: Low Interest Rates for a Little While Longer…

Marilyn Watson, head of the BlackRock Global Fundamental Bond Product Strategy Team

“Financial repression has not ended. We expect to see further loosening on the fiscal side in the UK and elsewhere. We’re not going to see interest rates rise anywhere soon in developed markets. With continued low rates, it will still be very hard for investors to get the income they’re looking for.”

“For investors, the solution to this environment is to be targeted and diversified, but also to take as flexible an approach as possible, retaining the ability to protect and hedge portfolios and to be very nimble in terms of changing overall allocation. Investors also need to be realistic about the returns they can achieve.”

“Some of the valuations in fixed income look stretched. Some of the investment grade bonds, for example, are relatively expensive, plus treasuries, government bonds, bunds and gilts. There’s not a bubble that’s going to burst, but it is harder and harder to find genuine sources of value.”

Week Past

European Central Bank (ECB) interest rate decision – The ECB decided unanimously to keep interest rates at their current level of -0.5%, in line with market expectations. The central bank also announced a strategic review into whether its inflation target is still appropriate. [1]

German flash manufacturing and services Purchasing Managers Indices (PMI) (January) – The German economy rebounded at its fastest pace in five months at the start of 2020, suggesting the “storm clouds may be starting to clear”. The composite index rose to 51.1 from 50.2 at the end of 2019. [2]

UK flash manufacturing and services PMI (January) – UK manufacturing and services saw a rebound following the UK General Election. The composite PMI rose to a 16-month high of 52.4, up from 49.3 in December. [3]

US flash manufacturing and services PMI (January) – US manufacturing continued its weakness in January, with the IHS Markit flash PMI falling to 51.7 in January from 52.4 in the previous month. However, services continue to strengthen. [4]

Week Ahead

Brexit – the UK formally leaves the European Union on 31 January, allowing trade negotiations to begin. [5]

Bank of England rate decision and inflation report – Although there has been talk of a potential interest rate cut ahead of Brexit, market expectations now point towards no change. [5]

Federal Reserve rate decision – the Federal Reserve has clearly signalled that rates are on hold at 1.75% in the short-term with many not expecting a rate rise until 2020 and beyond. [5]

US and Eurozone gross domestic product (GDP) – Early readings are expected for US and Eurozone economic growth. The market is expecting US growth to be stable at 2.1%, while Eurozone growth is slated to fall from 1.2% to 1%. [5]

Chinese manufacturing and non-manufacturing PMI (January) – Manufacturing has been expected to rise from 50.2 to 51.1, but data may be disrupted by the Coronavirus outbreak. [6]


  1. ECB holds rates as strategic review gets underway, CNBC, January 2020
  2. German economy picks up pace while Eurozone growth stagnates, City AM, January 2020
  3. UK firms see boost as uncertainty eases, survey says, BBC, January 2020
  4. US manufacturing PMI at 3-month low in January, MarketWatch, January 2020
  5. IG Index, week ahead, January 2020
  6. FX Street, Economic Calendar, January 2020

The opinions expressed are as of February 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.