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How important is January to the stock market?
(Stats-article from the year 2016)
Robert Sluymer, a technical analyst at RBC Capital Markets, noted that some consider the first trading day, week and month to be significant indicators of the year ahead. He looked back at the performance of...
...the Dow Jones Industrial Average and found that the first trading day has predicted the year's direction ca. 60 % of the time since the year 1901.
However, in the past 15 years, day one has been even more reliable, predicting the year's direction > 70% % of the time. The first week of trading has also become a more reliable indicator in the past 15 years, predicting the market's annual return > 65 % of the time.
January's trading pattern has also been a pretty accurate indicator. Since 1901, the Dow's performance (up or down) in January predicted the year's direction > 70% per cent of the time. But that climbs to 80% based on data going back to only 1946.
Sluymer also added that the Dow has finished the year up 64 per cent of the time since 1901.
The most relevant conclusion: "January appears to have the highest -predictive value- for the year," the analyst said, adding that if the first day, week and month are all in the same direction, the year is very likely (85 per cent) to close in the same direction.
