Hulbert: January Rout Doesn't Mean You Should Sell Stocks

Sunday, 02 Feb 2014 01:51 PM

By Dan Weil

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The January indicator — the idea that the stock market's performance in January foretells its performance for the year — is accurate, says Mark Hulbert, editor of the Hulbert Financial Digest. But that doesn't mean you should go out and sell your stocks, he says.

As for the January indicator's accuracy, in the years since 1973 in which the Standard & Poor's 500 Index gained during January, the index added another 11.2 percent on average over the next 11 months, Hulbert writes on MarketWatch.

Meanwhile, the index appreciated just 0.2 percent on average in the 11 proceeding months
during years the S&P 500 fell in January.

Editor’s Note: Secret ‘250% Calendar’ Exposed — Free Video

"Compared to other market-timing indicators that are out there, this one appears to be one of the most accurate,” Michael Cooper, a finance professor at the University of Utah, told Hulbert.

The Standard & Poor's 500 Index slumped 3.6 percent in January after soaring 29.6 percent last year.

So should you get rid of all your stocks now? No, says Cooper.

First, even when stocks fall in January, they rise during the rest of the year more than half the time. For the S&P 500, it's been 56 percent of the time since 1945, Sam Stovall, chief equity strategist at S&P Capital IQ, tells Hulbert.

Many investors have turned cautious after January's decline.

"It seems investors can expect increased volatility and more modest returns as the year unfolds," Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, told Bloomberg.

"We need earnings to drive the market to meaningfully higher levels, and to do that you need an improving economy."

Editor’s Note: Secret ‘250% Calendar’ Exposed — Free Video

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