By Natalie Mojica  

The S&P 500 finished January down 5.3%, its worst start to the year since 2009. The S&P’s average return for January was up 1.2%, and many believe January’s performance will set the bar for the market’s performance this year.  

Prominent tech companies, like Amazon and Facebook, faced unexpected drops in their stock prices. Amazon dropped 10%, while Facebook dropped about 7%. According to Forbes, markets are focused on the Federal Reserve plans to mitigate volatility without damaging the economy, a task that may prove difficult as the Fed looks to restrain monetary policy and deter inflation.   

Nicolas Colas, co-founder of DataTrek Research, an organization dedicated to providing commentary on the stock market for thousands of investors, emphasized that “[policy from the Federal Reserve] remains the biggest wildcard” in predicting the results of February’s investments. According to DataTrek Research’s January indicator, “when the S&P is down in January, it’s a coin toss as to how the index will perform in February…history says the risk skews to the downside.”  

The market’s volatility has scared many investors, according to CNN‘s Business Fear and Greed Index. On the other hand, the dips in the market provide an advantage for those looking to diversify their portfolios and buy stocks like Tesla (TSLA) and FedEx (FDX) at a better price before they rise again.   

“In the meantime, investors should focus on building a portfolio that includes all 11 stock market sectors of the S&P 500 because concentrating on any individual group of stocks could add risk… [this is] a market that seems best suited for balanced portfolios,” Chief equity strategist at U.S. Bank Wealth Management, Terry Sandven, advised.     

The 11 stock market sectors include information technology, healthcare, financials, consumer discretionary, communication services, industrials, consumer staples, energy, utilities, real estate, and materials. Some stocks overlap in different areas—Disney (DIS) can fall into communication services because of its streaming platforms and consumer discretionary because of its theme parks.  

Despite investor concern, reports show that the stock market is growing again. The S&P 500 has risen 1.9%, The Dow has increased 1.2%, and even NASDAQ is up 3.4% as the market closed yesterday. Plus, quarterly reports from companies describe earnings that are “modestly above expectations,” encouraging news that there will be more gains coming soon.