As The S&P Goes In January, So Goes The Year

In the last 60 years this January Barometer has had only six major errors since 1950 for a 90% accuracy ratio. 6 Outliers:

  1. Vietnam affected 1966 and 1968
  2. 1982 was the start of a major bull market in August
  3. Jan rate cuts and 9/11 affected 2001
  4. military action in Iraq affected Jan 2003
  5. 2009 was the beginning of a new bull market following 2nd worst bear market on record and so far the worst S&P 500 January on record

The “January Effect” shows that small-cap stocks tend to outperform big caps in January. The trend can be graphically displayed by dividing the Russell 2000 index by the Russell 1000 index. Taking data from 1979 to 2010 shows the large-caps bottoming out in December while small caps surge in January creating an upward trend into June.


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