A good way to put off investors for the rest of the year is to tell them that if the market does badly in January, it will probably do badly in the rest of the year. It is a particularly poor idea since the thinking behind it is bogus.
According to The Wall Street Journal, "What the market does in January often foretells how U.S. stocks will perform during the rest of the year. It is looking rough so far." In seven of the last ten years, the first month's move in the market ended up being how stocks moved in the entire year.
Since each year is different, the concept is silly and has no statistical relevance. In some ways it is like saying that a child born in January will be a year old the next January.
The thinking behind the notion is that a year that starts off badly stays tough for the remaining eleven months. But what if the stimulus package works? What if housing bottoms in the third quarter, as many experts think it will?
Some statistics are worthless. The January stock market "predictor" is one of them
Douglas A. McIntyre is an editor at 247wallst.com.
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