US and emerging markets stocks surged in January on strong growth and corporate earnings. Developed stocks also performed well, assisted by the US dollar’s decline. Importantly, robust consumer spending and business investment helped the markets take a brief US government shutdown in stride. Fiscal stimulus, improvements in trade from the weaker dollar, and stabilizing energy markets will accelerate differential US growth. With the US economy at or above potential output, the resulting pressure on the Fed to raise rates will increase. The risk of central bank mis-steps remains high.