Stocks rebounded in a pronounced manner in the first month of 2019, making it the best January showing fore the market since 1989. Even though the data points continue to point to a slowing global slowing economy, especially in China, and in the eurozone with Italy in a recession and France not too far behind, the rollback of December-quarter concerns propelled the market higher, especially during the last week of the month when the Fed signaled patience with the speed of further interest-rate hikes.
For the month in full, the S&P 500 finished up just shy of 8.0%, below the 9.9% surge in the Real Money Post-Industrial Average (RMPIA), a modified market-cap weighted portfolio consisting of 30 of the most important stocks in the market today. With 11 of RMPIA's constituents soaring in the double-digits during January, the average even edged out the tech-heavy Nasdaq Composite, which returned 9.7%.
Bolstering RMPIA's relative outperformance was the 38% climb in Celgene (CELG) , Facebook's (FB) late-month post-earnings rise that brought its January move to just over 27%, with Netflix (NFLX) on its heels soaring 26.8%. Those three stocks, along with the other eight double-digit climbers that benefited from company-specific earnings results as well as the market's melt-up, led RMPIA to gain additional ground compared to its mid-January return.
As we begin February, just over half of the S&P 500 companies have yet to report their quarterly results and given the tone of the January PMI data from IHS Markit odds are we are likely to see further downward revisions to earnings expectations for the S&P 500 in the coming weeks. Paired with the market's push higher in January, should those revisions come to pass, that likely means the market gets incrementally more expensive. In assessing RMPIA's constituents, however, we continue to see favorable top and bottom-line dynamics in the coming quarters that reflect their respective tailwinds that, on average, should deliver faster earnings growth that the S&P 500.
Catalysts to watch in the coming weeks will be incremental developments on U.S.-China trade and potential moves by the European Central Bank (ECB). Following the weakening economic data in the eurozone, ECB President Mario Draghi said, "The European Central Bank is ready to use all its policy tools to support Europe's softening economy, including by restarting a recently shelved bond-buying program."