01/15/2010
As January Goes...
Time for our yearly look at the old saying, “As January goes (specifically, the S&P), so goes the year.” According to the Stock Trader’s Almanac, since 1950 the January indicator has only five major errors for a 91.5% accuracy rate. “Vietnam affected 1966 and 1968; 1982 saw the start of a major bull market in August; two January rate cuts and 9/11 affected 2001; and the anticipation of military action in Iraq held down the market in January 2003.” [2009 was another major mistake but the authors didn't have a chance to comment on it before publication of the 2010 Almanac.]
If you include the ten flat years, which the Almanac defines as less than +/- 5% for the S&P for the entire year (not including dividends), the barometer’s accuracy ratio is 74.6%; the more common measurement.
So I thought we’d take a look at the past ten years, including three of the major mistakes (’01, ’03 and '09).
S&P 500 return for January…and the year*
January 2000 -5.1% [-9.1% for the year]
January 2001 +3.5% [-11.9%]
January 2002 -1.6% [-22.1%]
January 2003 -2.7% [+28.7%]
January 2004 +1.7% [+10.9%]
January 2005 -2.5% [+4.9%]
January 2006 +2.5% [+15.8%]
January 2007 +1.4% [+5.5%]
January 2008 -6.1% [-37.0%]
January 2009 -8.6% [+26.5%]
12/31/09…S&P 1115**
*For the yearly return, I include dividends. Stock Trader’s Almanac does not. I’m still including 2007 as a ‘flat’ year, based on their methodology; the S&P being up 3.5% before dividends.
The January barometer is but another tool, albeit an important one particularly when the geopolitical scene is sanguine. However, I think you would agree the global environment today is far from being so.
**Another indicator involves the first five days of the year, and after the first five of 2010, the S&P was at 1144, up 2.7%. According to the Stock Trader’s Almanac, “The last 36 up First Five Days were followed by full-year gains 31 times for an 86.1% accuracy ratio and a 13.7% average gain in all 36 years.” [But the 24 down First Five Days were followed by 13 up years and 11 down, witness 2009.]
Sources: “2010 Stock Trader’s Almanac,” Jeffrey A. Hirsch & Yale Hirsch; StocksandNews.com database.
Wall Street History returns in two weeks.
Brian Trumbore
