The January effect could be defined as a general increase in stocks every January.
When I was starting out in stocks a friend told me to buy stocks during January as people are normally optimistic during this month and because of the January effect where we could see stocks rise during this period.
Since its January and we are just at the start of the trading year. I tried to gather the last 10 January’s, from 2005 up until 2014 to see if the ideology would pan out with the given sample space.
January 2005 – February 2005: PSEI UP 13.27%
January 2006 – February 2006: PSEI UP 2.46%
January 2007 – February 2007: PSEI UP 9.01%
January 2008 – February 2008: PSEI DOWN -8.94%
January 2009 – February 2009: PSEI DOWN -7.58%
January 2010 – February 2010: PSEI DOWN -1.73%
January 2011 – February 2011: PSEI DOWN -9.13%
January 2012 – February 2012: PSEI UP 7.25%
January 2013 – February 2013: PSEI UP 6.51%
January 2014 – February 2014: PSEI UP 0.95%
Looking at the charts and the data above, we could see that:
1. The market was up 6 out of 10 times in the last 10 years to account for only 60%.
2. The market was down for four straight years from 2008 – 2011.
3. There is no exact pattern to predict whether the market will be up or down on a given year.
4. 2014 was barely up, by less than 1%.
5. Stocks that were in an uptrend continued to go up further, while stocks on a downtrend continued to drop further.
6. Whatever the scenario is or the prevailing market whether it be bullish or bearish money can be made when you position and plan it well.
7. There’s is no prediction that is accurate on a consistent basis becasue markets move based on sentiment over the short term.
I do hope this post helps you in your trades! God bless you as you step into a greater year of abundance and prosperity for 2015! I will make a more expanded version of this trying to factor in 20 or 25 years worth of data. Will the results look the same or will we see something different? Stay tuned!
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- February 7th Stock Smarts Cebu: Technical Analysis
- February 12th Technical Analysis: Chart Patterns and Oscillators (Evening Session)
- February 18th Stocks vs Forex
- February 26th Fundamental Analysis: How to pick good stocks and avoid bad ones (Evening Session)
- March 20th Stock Smarts Singapore 2015 (Basic) – Day 1
- March 21st Stock Smarts Singapore 2015 [Day 2] : Technical Analysis
- March 22nd Stock Smarts Singapore 2015 [New Topics] : Portfolio Mangement, Market Outlook and Fundamental Analysis
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*Charts via Wall Street Journal