Statistics show January key month for Wall Street
January still could pull it off.
Today and tomorrow are the only trading days left, though. Last chance for a positive “January barometer.”
When share prices go up the first month of a year, generally the odds are good they'll go up for the full year. It's not a certainty, just a probability.
Market columnist John Dorfman threw cold water on it the other day. He gave a 50-50 chance to a down year in stocks whether January smiles or frowns.
Still, the notion that financial fate is mysteriously written stirs the imagination.
Since 1936, when average stock prices fell in the first month, by the final bell Dec. 31 they were off as much as 18 percent. From 1950 through 2013, the barometer pointed the full year 78 percent of the time.
Both statistics leave wiggle room. And as Wall Street sages love to point out, it's not a stock market but a market of stocks. Any company's shares could swing the other way.
No investor in diversified stocks or mutual funds ought to be spooked by January.
Sure, a full-scale bear market — with prices down 20 percent or more — would leave anybody wishing he'd sold something. Even a 10 percent “correction” brings regrets.
The stock market has done fine for several years, and its 2013 leap of 25 percent or more even revived the word “bubble.” The Federal Reserve practically invited it, conjuring up billions every month in stimulative dollars.
When the market gyrates, patient investors tend to just hold on. The Great Recession knocked the stock averages down by half. Millions of investors rode into the valley and eventually back up again as prices rose. It was no genius play but no catastrophe, either. Those who kept buying, in fact, got the benefits of “dollar cost averaging,” acquiring more shares at lower prices.
So it's wrong to say, as some do, that the recession “wrecked” 401(k) and other defined-contribution retirement plans; only defined-benefit pensions can work, they say. But regular, conservative, diversified investing can do it.
There's a fair amount of optimism right now. Car and truck sales are strong; energy is booming; housing is doing better; inflation tame (by official figures anyway); unemployment numbers are encouraging, and manufacturing jobs, coming back. A Bank of New York Mellon economist expects this expansion to last at least into 2017 and pick up.
Bearish growls are heard, too. Even though it has begun “tapering” its bond buying, the Fed pumped out so many dollars as to risk bad inflation (and stock market shock) ahead. Business remains hesitant to expand and hire. Uncertainties keep coming from government: the unknowns of Obamacare and pressure to raise the minimum wage, which inevitably would raise all labor costs. And lurking behind the scenery, the unpaid bills of the welfare state: a national debt of $17 trillion, tolerable only with the Fed's super-low interest rates that penalize savers and can't last.
As January's fortune-telling season winds down, long-term investors should hang in with diversified stocks and mutual funds. As a hedge against what government might yet do, stash a few gold and silver coins.
Jack Markowitz is a Thursday columnist of Trib Total Media. Email email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Reagan shooter Hinckley closer to permanent freedom
- Steelers won’t be backed into a corner at NFL Draft
- Crosby’s 2 goals lift Penguins past Rangers, even series
- Sutter steps up for Penguins in series-tying victory
- Fights reported, shots fired outside Monroeville Mall restaurant
- Starkey: Taylor’s type fading away
- Penguins notebook: Johnston says Perron needs to shoot
- Transportation challenges rife as Pittsburgh focuses on making fixes
- Coming off hill revives Seton Hill University, downtown Greensburg
- Crosby says Edmonton would be good spot for prospective top pick McDavid
- Defense shines in Pitt football spring game