January saw the return of volatility to the U.S. equity market. A confluence of factors led to this uncertainty: Investors were faced with the influence of a stronger dollar and the effect of lower oil prices on corporate earnings growth. Simultaneously, there was diverging monetary policy among major central banks in the world, along with disappointing results from U.S. GDP in Q4 and weak economic data from the eurozone, China and Japan. The upshot was that U.S. market indexes trended lower last month.
As a result, investors responded by becoming even more risk averse. The MSCI USA Minimum Volatility Index, which tends to outperform when investor risk aversion increases, has now outperformed the MSCI USA Market Cap benchmark by more than 3% during the three month period ending January 30th, 2015, as can be seen in the exhibit below.
