The January Barometer
Comment of the Day

February 01 2023

Commentary by Eoin Treacy

The January Barometer

This article from Putnam may be of interest. Here is a section: 

Table 1 contains historical return data for the S&P 500 in the first five days of January as well as annual returns. This is the “Early Warning System.” The last 46 times that the first five days had positive returns, the full-year return was positive 38 times, for an 82.6% accuracy ratio. The average S&P 500 gain was 14.3% in those years.

The second part is the S&P 500 return in January and the accuracy in forecasting the return for the year. In years when the S&P 500 had positive returns in the month of January, the average return for the year was 17.6%. The indicator has registered 10 major errors since 1950, for an 85.7% accuracy ratio.

Eoin Treacy's view

74% of time, the stock market finishes up on the year in nominal terms. The big question for investors is whether the strong positive return for just about every asset in January will improve those odds. At least the market is starting from a lower level so the odds of achieving that goal has been improved. 

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