What a Turbulent January Could Mean for the Rest of the Year

January 31, 2020

The last day of January saw a massive sell-off as fears about the coronavirus outbreak grew. The S&P 500 was down 600 points, erasing any gains for the month, with the index down 0.2 percent from the start of the year. This could mean trouble for the rest of 2020 if the old adage “as goes January, so goes the year” holds true.

The so-called January barometer means that January’s performance is often indicative of the year’s performance as a whole. According to the Stock Trader’s Almanac, going back to 1950, 86 percent of the time that the S&P 500 was positive in January, the full year’s returns would be positive. The track record is even better in years with a presidential election. Every election year that saw positive returns in the first month of the year would see positive returns for the year.

Of course, this is just a historical indicator and not a hard economic truth. An unforeseen event like the current outbreak would be the precise kind of anomaly that challenges tradition. Just because a positive January suggests a positive year, a negative January does not mean the year will be negative.

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