Market Insights
January 2023

In ancient Roman religion and mythology, Janus was the god of gates and doors, the god of beginnings and transitions, both in literal and abstract ways As we know, the month of January is named for him. Portrayed with two faces one facing the past, and one facing the future Janus was proudly venerated as a uniquely Roman god (rather than one adopted from the Greek pantheon) One way to honor Janus was essentially to exchange New Year’s gifts such as dates, figs, honey and even coins with your friends These gifts, strenæ in Latin, became étrennes in French, strenne in Italian (and Neujahrsgeschenk in German, for some reason).

We, the neo Romans, had to deal with the ugliest face of Janus last year, and gave up a large chunk of our portfolios to honor him (as a reminder, 2022 performances: S&P 500 -19.4%, Nasdaq-100 -33.0%, Stoxx Europe 600 -12.9%, Nikkei 225 -9.4%, HSCEI -18.6%). Pleased with our generosity, Janus in January decided to offer us better prospects on the macro, monetary and performance fronts.

Global equities bounced in January indeed (S&P 500 +6.2%, Nasdaq 100 +10.6%, Stoxx Europe 600 +6.7%), in a reflection of investors’ growing belief that central banks can now tame inflation without bringing a recession. Credit spreads tightened substantially (iTraxx XOVER 5 yr 414 bps i.e. -60 bps, CDX 5 yr 430 bps i.e. -54 bps). This soft landing notion has been reinforced by a flurry of economic indicators in the U.S., ranging from (i) a better-than-expected jobs report (US nonfarm payrolls +223,000 in December vs. consensus +200,000 ), (ii) reassuring inflation data (US headline/core CPI further decelerating to 6.5%/5.7% year-over-year – the lowest annual advances in over a year), (iii) University of Michigan 1-year inflation expectations falling to 4% from 4.4% and household confidence rising to 64.6 from 59.7 last month, (iv) stronger-than-expected economic activity (US Q 4 GDP expanding +2.9% annualized vs. consensus +2.6%).