Polls / January 16, 2012

Do you know what the “January effect” is and how it relates to investing?

Two-thirds of respondents to the latest eZonomics poll do not know what the “January effect” is and how it relates to investing.

A sign of things to come?
There is a saying about the United States share market: “as goes January, so goes the rest of the year.”
The adage sums up the “January effect”, the belief held by some that if share markets do well in January, they will have a good year overall. A study that compared share market performance in years with positive Januarys against years with bad Januarys showed some evidence of the effect, blogged Chris Dillow for eZonomics. But Dillow wrote that the “rule” seemed to have broken down.
“In the last six years, the ‘January barometer’ has failed as often as it has succeeded,” he wrote.
Performance in the United States can influence markets elsewhere, meaning January effects could be relevant to investors in different countries.

The outlook for 2012
Profitable opportunities in financial markets can disappear if they are noticed and investors try to exploit them, in turn driving prices up. Like changes the natural world, markets adapt.
So far this month the S&P500 is up 2.5%. But time will tell if it ends January positively – and whether the January effect will hold up this year.


eZonomics team
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