With the New Year here, how does “As January goes, so goes the year” hold up to predicting how the rest of the year’s stock market returns will be based upon the return of the stock market in January? The suggestion is that if the stock market has a negative return in January then we’re in for a negative return year.
The data in this article shows the monthly returns of the S&P 500 Index for each January since 1926, compared to the subsequent 11-month return (February – December). A negative return in January was followed by a positive 11-month return about 60% of the time, with an average return during those 11 months of around 7%.
Conclusion: the long-term health of our retirement portfolio should not be predicated on the whether the first month (or any month for that matter) is good or bad. From the article: “We should remember that frequent changes to an investment strategy can hurt performance. Rather than trying to bear the market based on hunches, headlines, or indicators, investors who remain disciplined can let markets work for them over time.”