Trading The Beginning of the Year

With the year almost done, most traders and investors are already looking towards 2013. The question on everybody’s mind is figuring out how the market will perform during the beginning of the year. Besides the market gods, nobody knows the answer to this. However, this does not mean we cannot use past patterns to figure out the likelihood of an outcome.

Below is a table of the returns for the S&P 500 ($SPX) in the beginning of the year (since the start of the 21st century, 2000). In the first column, you have the return for January.  In the second column, you have the return for January and February. And in the third & final column, you have the return for Quarter 1 (January-March).

Surprisingly, none of the averaged returns came back positive. Not only that, but there was only 1 time period in which there was a positive double digit return, and that was from this year. While collecting the data, I noticed how most of the more negative readings came during market tops or bear markets. This basically says one thing: “Don’t chase the market, and don’t try to catch the bottom”. Some of the better/flat returns came during more bullish/stable markets.

Of course, using the past 12 years limits the amount of data used. However, I thought looking at the past 12 years (aka the “digital” era) was prudent because it would show what the market has done recently, and not overall (which could skew the data….because today’s stock market is not your grandpa’s market).












Note: I rounded the numbers, so numbers could be slightly off.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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