Saturday, February 03, 2007

January Barometer: What Does This Suggest?

An often cited mantra on Wall Street is "as goes January, so goes the year". This January saw the S&P 500 Index rise 1.4% thanks to an increase of 1.2% during the last two trading does of the month. According to Standard and Poor's, the 1.4% advance is equal to the average return in January since World War II. Following is a chart from Chart of the Day detailing historical returns for the S&P 500 Index in the months following a January that achieved positive returns. Chart of the Day notes:

"...(the) chart presents the average performance of the S&P 500 one, three, six, and 11 months following a January gain (blue bars) and following a January loss (gray bars). The chart illustrates that the S&P 500 has performed much better (on average) during the months following a January gain. In fact, 11 months following a January gain; the S&P 500 was up 89% of the time..."

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