Investors commonly believe that January’s performance can be somewhat of a telltale sign about how the rest of the year will go.
The idea that as goes January, so goes the rest of year. It has been a surprisingly accurate measure, correct 89 per cent of the time since 1950, according to Stock Trader’s Almanac.
Longer term, it’s been pretty accurate, too. If the Standard & Poor’s 500 rises in January, markets rose that year 88 per cent of the time since 1936, says Ken Winans of Winans International. Meanwhile, if the market as down in January, stocks fell 80 per cent of the time. January is of keen interest this year as investors wonder if stocks can repeat their strong performance from last year.
So far, during the month of January, the S&P 500 is down 1.4 per cent. The S&P TSX index is up 1 per cent.
But Winans warns investors from reading too much into January. The indicator does fail. For instance, the market fell 3.7 per cent and 8.6 per cent in January 2010 and 2009, says Stock Trader’s Almanac. And both years, the market ended quite a lot higher.