''as Goes January So Goes The Rest Of The Year''

[sleepless]

''As goes January so goes the rest of the year''

Adrian Lowcock | 4 February 2013

''As goes January so goes the rest of the year''

The FTSE 100 rose an impressive 6.3% last month. The world of investing is littered with sayings and superstitions, one of which is that the market's performance in January sets the tone for the remainder of the year. According to the saying, if the market rises in January it will also be higher at the end of the year than the start and vice versa.

In 20 out of the 29 years since the FTSE 100's inception it followed the saying. However, it can be dangerous to set too much store by a relatively weak trend. The FTSE 100 fell 6.4% in January 2009, but those sitting out the rest of the year would have missed a 22.1% gain over the whole year. Similarly there are years when the market has disappointed following a buoyant January.

Stock market sayings are a result of the human desire to find order and patterns in random numbers, but often ignore the events around them that cause share prices to rise and fall.

This year, as ever, it is difficult to predict how the market will perform. There are a number of questions to ask:

Is the market good value at its current level?

What is the outlook for company profits?

What effect will politics have, especially in the euro zone and US?

The answers are not straightforward, and therefore in my view it is better to take a longer-term view and avoid trying to time the market.

That said, I do believe the UK market looks fair value at present, and shares certainly look cheap against some other asset classes such as gilts and corporate bonds. Given continued low returns on cash, shares are starting to appeal to many new investors who can afford to and are prepared to take on the additional risk. Although the economic outlook remains weak in the UK it is improving elsewhere in the world, and the euro zone debt situation appears less of a concern (at least for now).

[zugzwang]

This year, as ever, it's difficult to predict how the market will perform.

No it isn't.

As long as Abe, Bernanke, Mervo/Carnage et al. continue to print then stock markets all around the world will continue to climb. On a risng tide all turds are lifted. Only inflation will stop them.

[zugzwang]

Why do we still refer to these things as stock markets anyway? A market is the very last thing they are.

[Madmaximum]

So that means that as far as January goes it has a 31% of being wrong fow what will happen for the rest of the year........

Hardly conclusive! And why is that sample of data actually big enough to be relevant? why is it 29 years? perhaps previous years didnt match the pattern they were looking for..... for instance if the 2 years previous didnt match in which case it would only be right 65% of the time. Getting towards the chances of flipping a coin.

I'm always wary of statistics especially when it is a weird number like 29- looks like they are backfitting to me.

[Snugglybear]

So that means that as far as January goes it has a 31% of being wrong fow what will happen for the rest of the year........

Hardly conclusive! And why is that sample of data actually big enough to be relevant? why is it 29 years? perhaps previous years didnt match the pattern they were looking for..... for instance if the 2 years previous didnt match in which case it would only be right 65% of the time. Getting towards the chances of flipping a coin.

I'm always wary of statistics especially when it is a weird number like 29- looks like they are backfitting to me.

FTSE 100 didn't exist before then. Came into being on 3 January 1984. So almost exactly 29 years old.

Edit: typing this time.

Edited February 6, 2013 by Snugglybear

[Madmaximum]

Fair enough.

I still don't like the sample though, 30% chance of being wrong doesnt sound very conclusive to me.

[NEO72]

So that means that as far as January goes it has a 31% of being wrong fow what will happen for the rest of the year........

Hardly conclusive! And why is that sample of data actually big enough to be relevant? why is it 29 years? perhaps previous years didnt match the pattern they were looking for..... for instance if the 2 years previous didnt match in which case it would only be right 65% of the time. Getting towards the chances of flipping a coin.

I'm always wary of statistics especially when it is a weird number like 29- looks like they are backfitting to me.

Exactly. To put it a slightly different way, gamble on the ftse now and you stand almost a 1 in 3 chance of being out of pocket by year end. Not great odds really.

[sleepless]

will bump this thread every month or so..

Here are main indices at Feb 5th

FTSE 100 6282.76

Dow Jones IA 14004.15

NASDAQ 3173.98

DAX 30 7664.66

CAC 40 3694.7

Nikkei 225 11,046.92

Hang Seng 23,148.53

GBP/USD 1.565 09/33 GBP/EUR 1.15 23/31

[gf3]

The highest yielding savings account is 2.5% has any one got any ideas how high the ftse would have to go to match these low yields?

[silver surfer]

The highest yielding savings account is 2.5% has any one got any ideas how high the ftse would have to go to match these low yields?

I think the average dividend yield of the FTSE100 is a little over 3%, but of course that includes some companies that are paying no, or very low, dividends. It's not difficult to put together a portfolio of FTSE100 companies yielding 4.5-5.0%.

[Biggus]

Does anyone seriously believe the stock 'market' is not heavily manipulated? Nothing is left to market forces now. Stocks, commodities, mortgages, interest rates, the forex and so on and so on are all being rigged by central planners. Market cheating might be indirect via zero percent interest rates and money printing or directly using currency swaps or FLS. Either way there is no market.

Now commerce is just gambling. There is no motivation to produce or earn more than you can immediately spend as there is no way to save or invest. Industry has been killed. Starting a business is pretty well impossible. I don't see any end to this madness coming any time soon, so get used to it.

[corevalue]

Does anyone seriously believe the stock 'market' is not heavily manipulated? Nothing is left to market forces now. Stocks, commodities, mortgages, interest rates, the forex and so on and so on are all being rigged by central planners. Market cheating might be indirect via zero percent interest rates and money printing or directly using currency swaps or FLS. Either way there is no market.

Now commerce is just gambling. There is no motivation to produce or earn more than you can immediately spend as there is no way to save or invest. Industry has been killed. Starting a business is pretty well impossible. I don't see any end to this madness coming any time soon, so get used to it.

Exactly. It's like watching a big storm approaching, first the hazy sky, then the heavy dark cloud. We are just in the calm spell before the real event gets started. It's been slowly creeping up for thirty years or more, slow enough for all those at the top to get their shelters organised, whilst improving the security in the prison that the rest of us have to live in.

[sleepless]

Exactly. It's like watching a big storm approaching, first the hazy sky, then the heavy dark cloud. We are just in the calm spell before the real event gets started. It's been slowly creeping up for thirty years or more, slow enough for all those at the top to get their shelters organised, whilst improving the security in the prison that the rest of us have to live in.

Have you guys been watching Utopia?.

Anyway if it is fixed then get in the game and use it to your advantage.

Edited February 6, 2013 by sleepless

[sleepless]

The highest yielding savings account is 2.5% has any one got any ideas how high the ftse would have to go to match these low yields?

If you are serious about an income portfolio check out Hargreaves Lansdown www.hl.co.uk

Loads of useful advice and information.

The safest way is probably a UK income fund which invests in a range of high yielding UK equities.

Their Wealth 150 is a selection of more popular funds eg

Artemis Income (Retail)

Invesco Perpetual High Income

Invesco Perpetual Income

JO Hambro UK Equity Income

Liontrust Macro Equity Income (Class R)

Marlborough Multi Cap Income

Neptune Income (Class A)

PSigma Income

Rathbone Income

Threadneedle UK Equity Alpha Income

Troy Trojan Income (Class I)

[sleepless]

Update on main stock market indices

March 7th:

FTSE 100 6449

Dow Jones IA 14343

NASDAQ 3226

DAX 30 7940

CAC 40 3795

Nikkei 225 11968

Hang Seng 22771

GBP/USD 1.505 75/92 GBP/EUR 1.15 09/16

+++++++++++++++++++++++++++++++++++++++++

Feb 5th

FTSE 100 6282.76

Dow Jones IA 14004.15

NASDAQ 3173.98

DAX 30 7664.66

CAC 40 3694.7

Nikkei 225 11,046.92

Hang Seng 23,148.53

GBP/USD 1.565 09/33 GBP/EUR 1.15 23/31

==============================

[zugzwang]

Fiscal Cliff was a massive misdirection. Sequester is likely to be a washout. Under the current QEinfinity regime the Fed's balance sheet is set to grow by an annualised 38% this year. Unemployment is declining modestly. Commodity inflation still looks relatively benign. Abe and Carnage waiting on the flanks with even more firepower.

Interim conclusion:

Edited March 7, 2013 by zugzwang

[goldbug9999]

No it isn't.

As long as Abe, Bernanke, Mervo/Carnage et al. continue to print then stock markets all around the world will continue to climb. On a risng tide all turds are lifted. Only inflation will stop them.

Its flat out gambling, nothing more. More debt money just makes the system more volatile and the effects of a financial "event" more catastrophic. Certainty in markets is intrinsically self cancelling.

[gadget]

In 20 out of the 29 years since the FTSE 100's inception it followed the saying.

Who writes this rubbish? Well at least they're getting paid.. more worryingly who reads it / believes it?

20/29 i less than 2/3. Which for a binary option is pretty rubbish.

Not to mention that of course the stock market is more likely to rise over the year if it's already risen (and visa versa) To take it to extremes i confidently predict that if the market is up for the year by Christmas, it's very likely to end the year higher so let's all pile in!

[sleepless]

Who writes this rubbish? Well at least they're getting paid.. more worryingly who reads it / believes it?

20/29 i less than 2/3. Which for a binary option is pretty rubbish.

Not to mention that of course the stock market is more likely to rise over the year if it's already risen (and visa versa) To take it to extremes i confidently predict that if the market is up for the year by Christmas, it's very likely to end the year higher so let's all pile in!

You don't have to believe it. Stockmarket sayings are anecdotal. I like "sell in May and go away". Wish I had done many times,

Thing about the January saying is that 11 months is a long time for things to go wrong.

IMO this could be a really good year for markets in general as countries try and dig themselves out of the schite.

btw 20/29 isn't less than 2/3

Edited March 7, 2013 by sleepless

[gadget]

btw 20/29 isn't less than 2/3

D'oh

[gf3]

If you are serious about an income portfolio check out Hargreaves Lansdown www.hl.co.uk

Loads of useful advice and information.

The safest way is probably a UK income fund which invests in a range of high yielding UK equities.

Their Wealth 150 is a selection of more popular funds eg

Artemis Income (Retail)

Invesco Perpetual High Income

Invesco Perpetual Income

JO Hambro UK Equity Income

Liontrust Macro Equity Income (Class R)

Marlborough Multi Cap Income

Neptune Income (Class A)

PSigma Income

Rathbone Income

Threadneedle UK Equity Alpha Income

Troy Trojan Income (Class I)

Apparently a lot of income funds take their running costs out of the capital so they can publish higher yields.

I prefer rising stock prices capital gains tax is easier to avoid.

[sleepless]

Update on main stock market indices

April 8th

FTSE 100 6263

Dow Jones IA 14565

NASDAQ 3203

DAX 30 7679

CAC 40 3686

Nikkei 225 13192

Hang Seng 21727

GBP/USD 1.53 02/07 GBP/EUR 1.17 62/77

+++++++++++++++++++++++++++++++++++++++++

March 7th:

FTSE 100 6449

Dow Jones IA 14343

NASDAQ 3226

DAX 30 7940

CAC 40 3795

Nikkei 225 11968

Hang Seng 22771

GBP/USD 1.505 75/92 GBP/EUR 1.15 09/16

+++++++++++++++++++++++++++++++++++++++++

Feb 5th

FTSE 100 6282.76

Dow Jones IA 14004.15

NASDAQ 3173.98

DAX 30 7664.66

CAC 40 3694.7

Nikkei 225 11,046.92

Hang Seng 23,148.53

GBP/USD 1.565 09/33 GBP/EUR 1.15 23/31

==============================

[moesasji]

Who writes this rubbish? Well at least they're getting paid.. more worryingly who reads it / believes it?

20/29 i less than 2/3. Which for a binary option is pretty rubbish.

This kind of reporting indeed makes me scratch my head as this to me appears to be within the expected range. Statistical variation on discrete events scales with sqrt and sqrt of 29 is a bit more than 5. Hence you would expect that the number is in the range of 14.5 +/- 5, which it is. So if stock-markets indeed obey statistics you know which way it is most likely to go.....the opposite direction.

[Harry Monk]

Does anyone seriously believe the stock 'market' is not heavily manipulated? Nothing is left to market forces now. Stocks, commodities, mortgages, interest rates, the forex and so on and so on are all being rigged by central planners. Market cheating might be indirect via zero percent interest rates and money printing or directly using currency swaps or FLS. Either way there is no market.

Exactly. Here's how the stock market works.

There are four or five major players. They start to buy shares in Company X and this pushes the share price up.

Eventually it gains momentum, the Major Player stops buying as the general public home in on this "good thing" and fill their boots. The shares continue to rise in price.

When the momentum runs out, the Major Player suddenly sells off a significant portion of its shares in Company X. This spooks the market and everyone sells. The share price crashes. When the share price hits bottom, the Major Player buys again.

[zugzwang]

Exactly. Here's how the stock market works.

There are four or five major players. They start to buy shares in Company X and this pushes the share price up.

Eventually it gains momentum, the Major Player stops buying as the general public home in on this "good thing" and fill their boots. The shares continue to rise in price.

When the momentum runs out, the Major Player suddenly sells off a significant portion of its shares in Company X. This spooks the market and everyone sells. The share price crashes. When the share price hits bottom, the Major Player buys again.

Essentially correct except,

1. the major players are the world's biggest investment banks (primary dealers) + 20,000 hedge funds.

2. After ramping the stock with 'buy' recommendations the major players sell off part of their stake into the rising momentum they've helped create and then get short, that way they can make money on the downside too. Having established a sufficiently large short position they then dispose of their remaining stock holding and issue 'sell' recommendations to drive the share price down hard ensuring their short trades are executed at profit. As the share price continues to fall they begin to accumulate stock again cheaply prior to the next 'buy' reversal.

Rinse and repeat.

.

Edited April 8, 2013 by zugzwang