April may be the cruelest month to the poet, but U.S. equity investors are down some $1.1 trillion since the market’s peak on Dec. 29, according to the reckoning of Wilshire Associates. That includes a loss of $600 billion last week and $300 billion Friday alone, as the equity market failed to get the typical end-of-month lift from big players’ trying to burnish their monthly results.
 
And the dual nature of the markets could also be seen in the divergent fortunes of two hamburger purveyors. In another expression of the cliché that if you like the product, buy the stock, Shake Shack (ticker: SHAK) soared 119% Friday, the first day of trading after its initial public offering was priced above its already raised projected range. Meanwhile, McDonald's (MCD) got a lift Thursday following news that its former chief executive had checked out after persistently sluggish sales and poor stock performance, owing in no small part to a shift in consumers’ tastes to better burgers served by the likes of Shake Shack.
 
Stock investors might be opting for the Dollar Menu at Mickey D’s after January’s showing. Just look at exchange-traded funds that reflect what happens to those playing at home: The SPDR S&P 500 ETF (SPY) shed about 3% for the month, while the PowerShares QQQ Trust (QQQ), dominated by big technology names, slipped 2.1%. And despite the oft-repeated simplistic notion that small-capitalization stocks outperform when the U.S. economy and the dollar are strong, relative to overseas counterparts, the iShares Russell 2000 ETF (IWM) slipped 3.3% in January.
 
And according to other market lore, as goes January, so goes the year. According to the Stock Trader’s Almanac, that rule held 89% of the time from 1950 to 2013, with what that publication deemed just seven “significant” misses over that span. Yet, despite the 3.6% drop last January, the Standard & Poor’s 500 index wound up 11.4% higher for 2014. In the market’s favor this year are the widely noted tendency for up years in the third year of a presidential term and years ending in five.
 
At this writing, the winner of the Super Bowl isn’t known to fans of that hoary indicator.
 
Arguably more relevant is the deflationary tide that equities were fighting in the past month, which sent bond yields to record lows and, in some cases, below zero around the globe. By JPMorgan economists’ reckoning, some $3.6 trillion of government bonds traded at negative yields last week, equal to 16% of the universe they track.
 
It’s crazy to invest in a government-guaranteed loss, and with five-year German Bunds yielding minus 0.054%, their American counterparts’ 1.155% looks positively lush; even more so, the 30-year U.S. long bond, which fell to a record low yield of just 2.226%. As for the benchmark 10-year, it declined to just 1.644%, down about a half-percentage point since the turn of the year and, more importantly, back to virtually where it stood in May 2013 before the so-called taper tantrum, when the Federal Reserve warned of the eventual end of its bond-purchase program.
 
Once again, the markets are anticipating that the Fed will drop the other shoe, in the form of an eventual rise in short-term rates. Last week’s Federal Open Market Committee meeting statement gave the impression that the first hike still would come in the summer, which failed to deter the rally at the long end of the market. Bond bulls who bought the iShares 20+ Year Treasury Bond ETF (TLT) were rewarded with a sparkling 9.8% gain for January.
 
The stocks that have held up best have been those that mimicked bonds, notably utilities. But there seems to be a limit. The Utilities Select Sector (XLU) ended up 2.32% for January, even with a sharp, 2.21% drop Friday in spite of a rallying bond market.
 
Oil continues to weigh on the mind of the market, despite a sharp spike late Friday that had all the earmarks of end-of-month technical maneuvers. But the fundamental effects continue to pile up. The big integrated oil companies, also viewed widely as sources of income for their generous and seemingly untouchable dividends, remain under pressure. Chevron (CVX) Friday said that it would suspend its stock-repurchase program and slash its drilling budget in reaction to the crash in crude.
 
The effects also are beginning to show up in the public sector. Bank of America Merrill Lynch’s municipal research noted a recent S&P report stating that the impact of reduced capital spending and employment in most oil-producing states with diversified economies, such as Texas, should be muted.

But last week, BofA Merrill Lynch also reported that Kern County, Calif., had declared a fiscal emergency as result of the oil collapse. Kern County, we’re enlightened to learn, is the largest oil-producing county in the nation, and accounts for 71% of the oil produced in California, the third-largest oil-producing state in the U.S.
 
Such events have yet to show up in the economic data. The initial estimate of fourth-quarter gross domestic product showed real annualized growth of 2.6%, down from the heady 5% pace of the third quarter. But stripped of the effects of inventory changes, real final sales slowed more sharply, to a 1.8% annual rate from 5% in the preceding quarter. Inflation also was nowhere in sight, with the deflator for personal consumption expenditures falling at a 0.5% clip; excluding food and energy, it was up at a 1.1% yearly rate. On a year-over-year basis, the real PCE deflator advanced 1.4%, well short of the Fed’s target of 2%.
 
Janus’ two faces represent looking backward, as with published data, and forward, like the markets.

The action of the latter, with tumbling bond yields and commodity prices, a rising dollar and stumbling stock market, points to less visibility ahead.
 
Virtues that are deemed old-fashioned might better be called timeless. In the realm of finance and investing, that would aptly describe dividends. In academic circles, the notion of a company returning a portion of its earnings to shareholders has been called quaint, even Victorian, in the words of one prominent professor.
 
Corporations also often prefer to repurchase their stock, contending that it’s more tax-efficient than paying out cash, which often is the case. Of course, the incentive for buybacks often is to shrink the total of shares outstanding, which may help offset dilution resulting from the exercise of employee stock options.
 
Buybacks also boost earnings per share, which presumably would have a salutary effect on the share price. That, in turn, would tend to enhance executive-compensation schemes tied to the stock.
 
All of which is lost on individual investors who prefer or even depend on a quarterly check from the companies in which they invest. Even more, those who plow back those payouts and reinvest the dividends will witness (in most cases) the slow but steady effects of compounding, like a tree growing in your backyard, from a few feet not many years ago to higher than the house now.
 
Those who have come to appreciate the, yes, old-fashioned virtues of dividend investing have long turned to the Speaking of Dividends column penned by our Shirley Lazo. A couple of weeks ago, she disclosed she would be retiring after 46 years with Barron’s—a total impossibility because it would have made her hiring a flagrant violation of child labor laws. Be that as it may, Friday was indeed Shirley’s last day here before trading the deep freeze of a New York winter for the sunny climes of Arizona.