Stocks staged their strongest January advance in 15 years despite absorbing negative news on the month’s last day of trading. Although the broad averages were little changed Tuesday, the S&P 500 has now rallied more than 200 points since its low point last October as investors have gained confidence in the domestic economy’s halting but nonetheless upward path.

Across the pond the European Union agreed to move closer to fiscal union and also approved a permanent bailout fund for the Eurozone. In addition, negotiations between Greece and its private creditors over a debt restructuring appear to be moving toward an agreement. Investors should realize international investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability.

Shareholders were upbeat last week when the Federal Reserve Board said it planned to keep short-term interest rates at exceptionally low levels “at least through late 2014”. Which is good news for small businesses and those who borrow money but bad news for those relying on CD returns. The central bank may restart a bond-buying program meant to push down long-term rates which should benefit the housing industry.

The behavior of equities in January is closely monitored by market watchers seeking indications of how stocks will perform for the full year. However, a first-month rally does not always hold the promise of later gains. Investing involves risk and past performance does not guarantee future returns. Last year, for example, the S&P 500 advanced more than 2% in January but finished 2012 essentially unchanged.

The Dow, NASDAQ and S&P 500 are all unmanaged and serve merely as a representation of the market. You cannot invest directly in an index and your specific portfolio returns may be different than the broad indices. While a strong start to the year is certainly welcome, investors must remain vigilant as 2012 unfolds since many of the issues that generated volatility last year remain unresolved. As always, a carefully considered long-term strategy is the key.

Shawn Powell Certified Financial Planner®