Does a strong January for share markets bode well for 2019?

Major share markets have sailed blithely immune to uncertainty and recent events.Photo / Getty Images

While currency markets have been roiled by fears about slowing global growth, trade tensions between the United States and China, the thankfully-ended US government shutdown and ongoing Brexit woes, major share markets have sailed blithely immune.

Indeed, US shares are shaping up to turn in the strongest January performance since 1989.

The broad measure of US shares, the S&P 500 Index, did slip 0.22 points last week but its January performance so far is a 6.3 per cent gain.

"The market is still in the midst of an exceptionally strong start to the year," says Mark Lister, the head of wealth research at Craigs Investment Partners.

"This bodes well for the rest of the year, with a positive January usually pointing to a robust calendar year performance," Lister says.

"When the market is up in January, the likelihood of a positive performance for the calendar year jumps from 72 per cent to 88 per cent, based on returns data since 1950.

"Mind you, this relationship has been fairly hit-and-miss during the past 10 years. For example, US shares rallied 5.6 per cent in January 2018 before the S&P 500 finished the year down 6.2 per cent, the weakest return in a decade."

Our own benchmark S&P/NZX 50 Index eked out a 0.14 per cent increase last week and is now 3.4 per cent higher than it began the year.

Europe's Stoxx 600 Index is up almost 6 per cent for the month so far and even Britain's FTSE 100 index has managed a 1.2 per cent increase.

Lister says investors will be looking to the outlook statements of a rash of earnings reports from global brands including Microsoft, Amazon and Apple for a lead on how chief executives see 2019 shaping up.

So far, so good, with 22 per cent of the S&P 500 companies reporting already, 71 per cent have beaten earnings estimates and 59 per cent have exceeded revenue forecasts.

"The overall earnings growth rate for the S&P 500, compared to the same quarter a year ago, is tracking at 10.9 per cent per annum, on the back of revenue growth of 6.1 per cent," Lister says.

"Of those that have reported, about a third have mentioned the shutdown during results calls, with most of these in the financial and industrial sectors."

On Friday, in the 35th day of the government shutdown, President Donald Trump capitulated and agreed to re-open the government for three weeks without any of the US$5.7 billion in funding for a wall on the Mexican border that he had been demanding.

Other global brands reporting this week include Boeing, Caterpillar, Exxon Mobil and Visa.

Investors will also be looking to the first Federal Reserve meeting for the year on Wednesday – or 8am Thursday, New Zealand time.

"They seem to have done a bit of a back-track, an about-face" as far as further interest rate hikes go," Lister says.

"Recent statements from Fed officials (were) seemingly at odds with where the central bank was at just a couple of months earlier."

While there won't be any updated forecasts from the Fed, just a short statement, chair Jerome Powell will be giving a press conference.

"The Fed is still forecasting two rate hikes this year, but has repeatedly talked about the need for patience in recent communications," Lister says.

"Financial markets have responded to the latter and are now pricing only a five basis point increase in the key policy rate in 2019."

The latest US employment data is due on Friday but it remains to be seen how much the numbers will have been affected by the shutdown, which saw 800,000 Federal employees either furloughed or working without pay and another 1.2 million contractors without wages.

After a very strong 312,000 last month, economists are expecting a more modest 165,000 new jobs to have been created in January. The US unemployment rate is forecast to remain steady at 3.9 per cent.