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Statistics show January key month for Wall Street

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Thursday, Jan. 30, 2014, 12:01 a.m.

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

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