SAMT Blog
Will lightening strike twice?!
22. January 2023, by Ron William
Technical Analysis
Happy New Year and welcome to 2023! ☺ We kick-start by asking how market returns should play out
and will lightning strike again, after last year’s worse than expected shakeout? Seasonality patterns can
offer early clues. The calendar month of January originates from ancient Roman culture, named after
Jânus, a dual-faced god that could see both the future and past. Indeed, over the ages this archetypal symbology has influenced our collective psychology and even financial market analysis.
One such manifestation is the January Barometer (JB) which infers stock market performance in the coming year. Put simply: “as the year starts, is how the year will [likely] go”. The JB was popularised in the Stock Trader’s Almanac in 1967 and recently studied in a paper.
The numbers are persuasive. Over 62 years studied, the market’s mean return (using equal-weighted NYSE stock returns) was 7.2% for the next 12 months when January was a down month (a third of the time), compared to 18.9% when January was positive. In behavioural terms, the JB measures investor sentiment at the turn of the year, which is often a pivotal time. However, it can also serve as linear trend extrapolation, while experience teaches us that the trend is only your friend – until it bends!
Figure 1 illustrates four different seasons of the JB, using&...
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