There are different signs some investors point to as stock market indicators for the year. One such indicator is that if the team that wins the Super Bowl is one of the founding teams in the NFL, then the stock market would have a positive year. If an AFL team or expansion team won, the market would be down for the year. An actual article was dedicated to this topic in the Journal of Finance looking into its veracity. I think we can all agree that the Super Bowl has zero influence on how the stock market will perform over the year. If your investment strategy is based around this method then I think I would hold off on making any retirement plans just yet.
Another popular trend to site is the January anomaly. The theory goes that investors engage in tax loss harvesting late in the year to realize losses and then in January they buy back into those positions or similar positions and therefore drive up the overall market in January. However, additional research on the topic has found no discernable connection between tax loss harvesting followed by a January bump in the market. While historically a positive month, there is by no means a guarantee that January will see a rise in the stock market. One only needs to look back to 2009, which saw a -8.6% start to the year. It’s also considered a barometer for the rest of the year; as the saying goes “as January goes, so goes the year.” However, in 2009 after the rough start to the year the market staged a strong comeback rising 26.5% for the year. Trusting supposed indicators or rules is akin to gambling and in gambling there is another saying ‘the house always wins.’
Investors who try to devise methods to game the markets inevitability end up losing. The Investors who are rewarded are those who devise a game plan and stick to it. By designing a diversified portfolio asset allocation that invests efficiently and is geared towards your investment goals, you greatly increase your chances of coming away from the markets a winner.
Index Performance January Trailing 1 Yr
US Stock (Russell 3000) +5.05% +3.86%
Foreign Stock (FTSE AW ex US) +7.06% -8.35%
Total US Bond Mkt. (BarCap Aggregate) +0.88% +8.66%
Short US Gov. Bonds (BarCap Gov 1-5 Yr) +0.34% +3.26%
Municipal Bonds (BarCap 1-10yr Muni) +1.06% +9.00%
Cash (ML 3Month T-Bill) -0.00% +0.09%