S&P 500 posts best start to year since 1997
US index rises 5.2 per cent in January, as stock prices beat bonds and currencies
The Standard & Poor's 500 Index returned 5.2 per cent last month in the strongest start to a year since 1997, leading global stocks higher and beating bonds, commodities and currencies.
The benchmark index for US equities surpassed 1,500 during the month for the first time since December 2007, and the MSCI All-Country World Index of shares in 45 nations climbed 4.6 per cent, including dividends.
The S&P GSCI Total Return Index of 24 commodities added 4.4 per cent, the biggest increase since August.
The US Dollar Index declined 0.7 per cent and bonds lost an average 0.7 per cent as of January 30, snapping a six-month rally, according to Bank of America Merrill Lynch's Global Broad Market Index of 20,000 fixed-income securities.
Stock values rose by US$2.6 trillion as better-than-estimated corporate profits, the end of a US political logjam over spending cuts and tax increases, accelerating growth in China, and signs of a recovery in Europe led investors away from the safest assets in search of higher returns.
American equities may rise another 3 per cent this year, while the US dollar strengthens 1.9 per cent and precious metals lead returns in commodities, according to Bloomberg surveys.
"There's a lot of momentum for stocks even after such a good start to the year," said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees US$170 billion. "Earnings are strong, the economies around the world are bottoming, and valuations are attractive."
Investors have poured US$39 billion into equity mutual funds around the world this year, more than double the amount for the comparable period in 2012, according to data from US research firm EPFR Global.
The investors withdrew about US$250 billion in the past four years, scarred by the 2008 financial crisis that wiped out US$11 trillion in market value.
The last time US stocks had a better start was in 1997, when the S&P 500 climbed 6.1 per cent in January to end the year with a 31 per cent gain, an increase it has not matched since.
The benchmark US stock index may rise to 1,543 by year-end, within 2 per cent of its October 2007 record of 1,565.15, according to the average of 15 strategists surveyed on January 22. Citigroup predicts the gauge will advance to 1,615 and Bank of America sees a rally to 1,600 points.
The Dollar Index is forecast to climb to 80.7 by the end of 2013 from 79.2, according to the median estimate of 12 economists. Precious metals may rise as much as 25 per cent this year, as grains advance 18 per cent and industrial metals gain 16 per cent, according to a survey of 131 traders, investors and analysts in December.
Yields on 10-year US government debt might climb to 2.2 per cent by the end of the year, from 1.98 per cent on Thursday, according to the median estimate of 77 economists in a survey.
Of the 239 S&P 500 companies that have reported quarterly earnings so far this reporting season, 74 per cent have beaten analysts' profit estimates, according to data.