The resilience of the U.S. economy will likely be a continuing theme in the months to come, as will be the Fed’s timing (the Fed elected to hold interest rates steady at the first Federal Open Market Committee meeting of the year on January 31^st). Here are 3 things you need to know:

1. The S&P 500 recorded new highs and was up +1.59% in January. The Magnificent 7 accounted for 45% of the January return but without Tesla’s -24.63% decline, they would have accounted for 71% of the return. (Source: S&P Global)
2. The downturn in China’s real estate market, already the longest on record, is accelerating. The Hang Seng declined -9.2% (in USD terms) in January. China took their first meaningful step to ease monetary policy with a 0.50% reserve ratio requirement cut and there is a rumor of a 2 trillion-yuan stimulus plan.
3. U.S. regional banks sold off at month-end after New York Community Bancorp (NYCB) reported increase stress in its commercial real estate portfolio, renewing fears about the industry’s health.

Sources: J.P. Morgan Asset Management – Economic Update; Bureau of Economic Analysis (www.bea.gov); Bureau of Labor Statistics (www.bls.gov); Federal Open Market Committee (www.federalreserve.gov); Bloomberg; FactSet.

Indices:

• The Bloomberg Barclays Aggregate Bond Index is a broad-based index used as a proxy for the U.S. bond market. Total return quoted.
• The S&P 500 is designed to be a leading indicator of U.S. equities and is commonly used as a proxy for the U.S. stock market. Price return quoted.
• The MSCI ACWI ex-US Index captures large and mid-cap representation across 22 of 23 developed market countries (excluding the U.S.) and 27 emerging market countries.  The index covers approximately 85% of the global equity opportunity set outside the U.S. Price return quoted.
• The MSCI Emerging Markets Index captures large and mid-cap segments in 26 emerging markets. Price return quoted (USD).

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