What’s Happening To The Stock Market’s ‘January Effect’ In 2016? by George Athanassakos, The Globe and Mail
Investors around the world anticipate the month of January with excitement. This is because January tends to be, on average, a strong month for stocks, particularly those of smaller companies. However, the key word is “on average.”
The stock market strength in January is not a foregone conclusion. In many years, the so called “January effect” does not happen, and in some of those times, the stock market experiences a pronounced negative return in January, as seems to be happening this year. January’s stock market performance, in my opinion, depends a lot on how the year ahead is expected to unfold. Increased profit expectations from quarter to quarter and a steepening of the yield curve (the spread between the 10-year Treasuries and the one-year T-bills) – both of which are signs of healthy economic expectations – relate to positive January returns, while weakening of profit expectations and a flattening of the yield curve are associated with a negative January.
Don’t expect big lift in stocks due to ‘January Effect’: Stephenson (BNN Video)
Let me explain.
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