After one of the worst December’s in history, it was followed by one of the best January’s in history.

The S&P was up 8.01% in one month.  (Of course, it is still down 2.31% over the last twelve months, attributable almost entirely to the disastrous December.)  MidCap stocks were up 10.46% and SmallCaps were up 10.64%. This is a more normal relationship, with SmallCaps leading the way.

Interestingly, Value stocks (think dividends) rose 8.57%, over-pacing Growth stocks, which rose 7.51%.  This reverses a long-running trend and suggests to me that investors are “hunkering down” for a less-bullish stock market.

Commodities also reversed course.  Oil was up, suggesting improved growth prospects, although I suspect that increase is due more to political reasons than economic ones.  The increase in gold also reinforces my suspicion that investors are indeed “hunkering down.”

International stocks also came roaring back, with emerging markets out-pacing developed markets, 7.77% compared to 7.42%.  Latin America rose an astounding 14.52% — in one month!  (Remember:  half of all stock values are outside the U.S.)

However, before we pop the champagne and celebrate, there is something wrong with all this.  This whipsaw behavior has little relationship to the much more stable economy.  Yes, the VIX or volatility index declined, but it is still a too-high 16.57.  The economy is more healthy than the stock market.  Capitalism is self-correcting in the long run . . . but I worry about the stock market.