Wall Street is a pretty superstitious place. Seriously. I once knew a guy who had a 15-year-old Dixie cup on his desk as a good luck charm (long story.) Most traders and analysts are more rational; however, there still is an air of superstition on the street. There are plenty of old sayings and adages that seem to go along with stock market investing. “Sell in May, Go Away” is a prime example.
Another is the so-called January Effect.
The phenomenon, which promises higher returns during the first month of the year, seems to dominate the news cycle during the first few trading sessions. Investors act almost irrationally during this time, and completely change their allocations and risk profiles to take advantage of the effect.
This could be their dumbest idea yet.
The reality is, the so-called January Effect, is really just a piece of Wall Street folklore, and we have plenty of data showing it just doesn’t exist anymore.