There’s no denying that there is a lot of superstition and tradition when it comes to the stock market. While electronic trading, lowered costs and the growth of 401ks have taken away a lot of the mystique about the markets, there are still plenty of very old school things at play. “Sell in May, Go Away” comes to mind.
Another could be the January effect.
The seasonal pattern of stock returns that occurs during the first month of the year seems to dominate the news cycle during the first few trading sessions. Even though results for the phenomenon, which promise higher returns during the first month of the year, have been mixed at best.
However, this year, the effect seems to be working in investors’ favor. After the poor finish to 2018, the results for the first month of the new year are showing that the effect and continued returns may still be ahead. While it may not be worth it to completely change your asset allocation to take advantage of the effect, overweighting “risk” may prove to be fruitful.
Take a look at some of the worst market calls of all time here.