January as a Market Indicator for the Rest of the Year

January 5, 2018
Updated 3mo ago

Markets have gotten off to a strong start in 2018. Some say, as January goes, so goes the year. We discussed the popular investment theory with Brian Isabelle, Trading Strategy Desk Representative at Fidelity.

Past performance is no indicator of future results, but proponents of the "January Barometer" strategy think momentum from a positive January could set the tone for the rest of the year. Isabelle points out that this indicator has a 75% accuracy ratio since 1950, according to the 2017 Stock Trader's Almanac. Through his analysis, Isabelle explains that sometimes the theory works and sometimes it doesn't.

January is more likely to be an indicator for the rest of the year when the month finishes positive, according to Isabelle. He says one of the reasons for this could be momentum. If the market gets off to a good start, it could form a bullish trading pattern.