January Barometer
A theory stating that the movement of the S&P 500 during the month of January sets the stock market’s direction for the year (as measured by the S&P 500). In other words, if the S&P 500 was up at the end of January compared to the beginning of the month, proponents would expect the stock market to rise during the rest of the year. Investopedia Says:
If an investor believes in the ability of the January barometer to predict the equity market's performance, he or she will only invest in the market in the years when the barometer predicts the market will rise, and stay out of the market when it forecasts a market pullback.
While the January barometer has been seen to produce better than 50% accuracy rates during 20-year periods, it is difficult to produce excess returns by using it since the improved performance by staying out of the market during bad times can be more than offset by larger losses incurred when the barometer incorrectly predicts a bull market. Related Terms:
Barometer
Bull Market
Index
January Effect
October Effect
Pullback
Santa Claus Rally
Standard And Poor's 500 Index - S&P 500
Weekend Effect |