Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


7 charts on the US stock market's wild January

Tom Lauricella  |  02 Feb 2022Text size  Decrease  Increase  |  
Email to Friend

From start to finish, January was one wild month for the stock market.

Equities went from hitting record highs at the start of January to falling into “correction” territory of double-digit losses, only to roar back with strong gains on the final day of trading.

When the dust settled Monday:

  • The US Market Index lost 5.9% in January, the worst start to a year since 2009
  • During January, there were five days where the US market moved 2% or more, and ten days where the US market moved more than 1%
  • Value stocks outperformed growth by 11 percentage points, the widest gap since February 2001
  • Large growth stocks lost 12.9% and mid-cap growth stocks dropped 14.6%
  • Technology stocks slid 9%, the worst month of declines since March 2020
  • Consumer cyclical stocks fell 10%, the sector's worst monthly performance since March 2020
  • For tech stocks it was the worst January since 2008

These wild swings in the market came against a backdrop of a significantly shifting landscape for Federal Reserve policy and interest rates. With inflation surging in late 2021, investors had to recalibrate their expectations for the Fed. Rates are now expected to rise higher and faster this year.

With stocks starting off the year at relatively lofty valuations, the market was vulnerable to the kinds of declines seen over the course of the month. That was especially true of many technology and consumer cyclical names that had led the market higher in 2021.

“You can really see the lopsidedness of the selloff,” says Marta Norton, chief investment officer for the Americas at Morningstar Investment Management. “What was selling off the most was the favorites and what was holding up was the less attractive stocks of the last few years. You had an element of levelling out of the market.”

After a strong 2021, where stocks were bolstered by surging corporate profits and a strong economic recovery from the pandemic recession, the US Market index hit a new high within days of starting the year. However, things quickly turned south.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

(Click to enlarge)

With that decline came a noticeable spike in volatility and a white-knuckle ride for investors. To some degree measuring the market’s swings by the close of trading each day didn’t do it justice. For example, on Monday, 24 Jan, stocks collapsed by some 4% in the morning only to finish the session little changed.

(Click to enlarge)

Two of the biggest trends in January were the rolling over of technology and consumer cyclical stocks, and the collapse of growth names in general.

Within the Morningstar Style Box, the performance gap among stocks was stark and driven by where they landed on the value vs. growth style spectrum. That contrasted with 2021 performance where the market value of a stock played had a greater link to performance than whether it was undervalued or a fast-grower.

(Click to enlarge)

For growth stocks, January’s steep declines reversed a substantial portion of 2021’s gains.


(Click to enlarge)

But over longer time frames, growth and blend stocks still generally hold a substantial advantage over value. That's in part due to value's woes in 2020 when growth outperformed value by record margins. Large- and mid-cap growth stocks in particular remain far ahead compared to value stocks and smaller companies.

(Click to enlarge)

The other big trend in January was the collapse of technology and consumer cyclical stocks. These sectors had been major drivers of the market’s 2021 rally and many of these stocks were trading at lofty valuations. The tech sector's declines have come as investors adjusted to an outlook of higher interest rates and moderating economic growth for this year.

Among the big-name technology and consumer stocks that have taken a hit in January are NVIDIA (NVDA), which lost 17% in January after a 125% rally in 2021, Microsoft (MSFT), off 7.5% last month after a 52.2% gain in 2021, and Tesla (TSLA), down 11.4% so far in 2022 after a 49.8% gain last year.

(Click to enlarge)

Energy stocks rallied strongly in 2021 and started strong in 2022 on the back of rising oil prices.

ConocoPhillips (COP), for example, gained 22.8% in January following an 85.4% rally in 2021. Continental Resources (CLR), meanwhile, is up 16% in 2022 following a 177.4% return last year.

(Click to enlarge)

is the editor of Morningstar Direct.

© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend