The S&P 500 is on pace for its best January in more than three decades. To put that in perspective, gains for the major benchmark haven’t been this heady in January since “Fatal Attraction” made its theatrical debut in 1987.
At last check, in the final trading day of the month, the S&P 500 SPX, +0.72% was tracking a roughly 7.5% January advance, according to FactSet data. The mark in January 1987 was a 13.2% return. The Dow DJIA, -0.19% was set to rise 6.9% this month, putting it on track for its best January since an 8% gain in 1989, according to Dow Jones Market Data.
The broad-market benchmark S&P also is looking at its best month since October of 2015, while it would be the best monthly gain for the Dow since March of 2016.
Meanwhile, the Nasdaq Composite Index COMP, +1.23% is set for its best January since 2001 and its largest monthly climb since October of 2011.
Check out: MarketWatch’s snapshot of the market
It would be a remarkable turnaround for stocks, given that December marked the worst month for the three main equity gauges since the 2008 financial crisis rocked global markets.
What’s changed? Not much and quite a bit.
Although many of the catalysts that led to the market’s beatdown persist, at least the damage wrought upon stocks made them sufficiently attractive to investors looking to scoop up battered assets at perceived discounts, market participants have said. By one measure of valuations, price-to-earnings ratios, stocks have become much cheaper: P/Es based on trailing 12 months for the S&P 500 are at 17.66 from a high at 23.09 a year ago (see chart below):
On top of that, the Federal Reserve has adopted a decidedly more dovish stance in recent weeks, culminating in Wednesday’s policy update where the central bank notably said it was going to be “patient” about its plans to normalize crisis-era policy.
Read: Why the Fed may not announce a change to its balance sheet plan
For better or worse, all that has appeared to support more buying in assets perceived as risky, like stocks. Corporate quarterly earnings results also haven’t been as bad as investors had expected.
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