January is not one of the best months of the year in which to own stocks. Over the past two decades the S&P 500 has averaged January declines of 0.70% and the benchmark U.S. equity gauge has only been positive in half those Januarys.
However, some asset classes and the related exchange traded funds shine in the first month of the year. Those include silver and the iShares Silver Trust (NYSEArca: SLV).
Potential weakness in global manufacturing has been a particular worrying development for the silver market. While silver is classified as a precious metal, it is still used in a range of industrial applications from electronics to jet-engine manufacturing, which makes the metal sensitive to global economic trends, the Wall Street Journal reported.
Over the past 10 years, only one ETF has been positive in January more frequently than SLV and the silver ETF has been the best-performing commodity in the first month of the year over those 10 years.
SLV Shines In January
“The iShares Silver Trust is near the top of the list, averaging the biggest gain of all at 4.59%. In the past 10 years, SLV has ended January higher seven times,” according to Schaeffer’s Investment Research.
Looking ahead, silver and other precious metals may continue to face an uphill struggle as the Federal Reserve is expected to raise interest rates this month, which makes non-yielding assets like commodities less attractive. However, it is possible the Fed slows its pace of rate hikes next, potentially weighing on the dollar in the process. A weaker dollar could boost silver and other commodities.
“While Wall Street has suffered in December, SLV has shot higher, set for a monthly gain of 8.4% — its best month since January 2017,” reports Schaeffer’s. “The ETF is now staring up at its 200-day moving average, which hasn’t been toppled on a daily closing basis since June. For 2018, however, SLV is still on pace for a loss of nearly 10%. From its current perch around $14.44, another 4.59% gain would place it around $15.10 — back above the aforementioned trendline — to start February.”
SLV finished 2018 lower by almost 10%.
For more information on the silver market, visit our silver category.