Editor’s note: This article was first published in January 2013. The ten-year record it discusses covers roughly 2003-2012, and the remark that “this year could be very bullish” refers to 2013.
Statistically, January has foreshadowed how the stock market behaves for the rest of the year, according to a ten-year chart published by the Spanish magazine Inversión. In other words, if January closes higher, the gains continue throughout the year, and if January closes lower, the year ends in the red. As the chart showed, though, there have been three exceptions over the last ten years.
The most recent exception came in 2011, when the Ibex (Spain’s benchmark IBEX 35 index) rose 10% in January. Not only did it lose that gain, but the falls continued through the year until it had shed another 10%. Another exception came in 2009, perhaps the reverse case: January began with an 8% drop, and the Ibex ended the year up 30%, driven by hopes of what turned out to be a false way out of the crisis.
Why pay attention to January?
The truth is, it shouldn’t really be taken into account, except as one more statistic to complement our investment system. January may reveal how confident investors feel as they rebuild their portfolios. That confidence can carry on, or it can evaporate if the results of the companies in the index and the measures taken by governments don’t back it up.
There’s talk that this year could be very bullish, because there are few surprises left for us to hear and our index is very cheap.
See also: In the end, the most profitable stocks were the ones recommended to conservative investors
Frankly, I don’t think investors should put our ability as a country to get things wrong to the test. As I see it, stock markets may go up or they may go down (nobody knows, not even January), but bad figures on our economy and unemployment will come, you can count on that.
Featured image: cgb.fr, CC BY-SA 3.0, via Wikimedia Commons.
