Looking Back at the “January Effect”
The stock market has started off badly in 2015 reflecting everything from rising geopolitical tensions, to withdrawal of the Federal Reserve quantitative easing stimulus, to plunging energy prices, to weak macroeconomic conditions across most of the world. During the month of January, the DOW and the S&P 500 both fell between 3% and 4%. Many professional investors believe the direction of the market in January foretells how strong or weak the entire year will be.
It's fair to say that the market is long overdue for a correction, but even with the “January Effect" now in place, investors shouldn't count out the potential for a positive performance in 2015. Last year is an example: January was negative, yet 2014 was a solid year for stocks, with the DOW posting total returns of about 7.5% and the S&P 14%.
Short term implications of a less-than-stellar January are just that: short term, and pullbacks can be seen as providing attractive entry points for long term investments.
Susan W. Malloy / CEO, M Capital Wealth Management