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What Does a Negative January Mean for the Rest of the Year?
By JLP | January 20, 2008
As of Friday’s market close, the S&P 500 Index is down 9.75% in 2008. I posted that I hoped that this January’s performance wasn’t an ominous sign for the rest of year. That p0st got me to thinking about whether or not a negative January meant a negative return for the year. So, armed with the monthly returns for the S&P 500 Index going back 1926, I ran some numbers and here is what I found out:
Since 1926, there have been 29 years in which January had a negative return (not including 2008). Of those 29 years, 15 of them had a negative return for the entire year following the negative January. In other words, there appears to be a 50-50 chance of a negative return for the year following a negative January.
If there’s anything to be concerned about it’s the fact that should this year’s -9.75% start hold for the entire month of January, it will mark the worst January in the S&P index’s history:
What all this means for the here and now is anybody’s guess. My advice is to not let it worry you. Just make sure you’re properly diversified and let the market do what it’s going to do.
Topics: Investing |