January Omen Might Not Pan Out

Photo of author

By Jacob Maslow

stock market app on android phone
stock market app

Depending on which set of statistics you look at; the down performance of the Dow Jones Industrial Average for January should get you worried. In the past 117 years of the Dow Jones Industrial Average’s existence, for over 80 of those years the Dow Jones has correctly predicted the stock market performance for the rest of the year. Since the Dow Jones fell by 3%, many investors are afraid that the stock market will underperform this year.

This may be a lot of unnecessary anxiety. First, just because a market underperforms at the end of the year doesn’t necessarily mean that it won’t perform during the middle of the year. In fact, even if the market tanks as a whole, there are quite a number of bright spots in the market. There’s no such thing as a completely bad market performance where all stocks fell. If you are a great stock picker, it doesn’t matter whether the Dow Jones finished up or down in January.

Another source of comfort and peace of mind you should look at is S&P 500. The interesting about the S&P 500 historically is when January is down, the S&P 500 is up historically. It moves in an inverse relationship with the Dow Jones. Of course, this is not always the case. I mean in 25% of the case, the Dow Jones and the S&P 500 moved down together. With that said, you can get some peace of mind in the fact that you can at least place your bets with S&P 500 instead of the Dow Jones Industrial Average Index.

Regardless of what you think about these omens, one thing is clear: You need to pay attention to individual stocks. It’s individual stocks that outperform the market and can help you achieve a really profitable year. Focus on individual stocks. Track industries and pick winners.

Images Courtesy of DepositPhotos