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CLS: Does January Set the Tone for the Year?

01/29/2014

Recently, Merrill Lynch evaluated January performance and what it typically signals for the full calendar year, more specifically, they evaluated the effects of the first five trading days of the year. Based on S&P 500 data going back to 1928, the month of January can be a good predictor of the year. When January is up, the year is up 80 percent of the time with an average return of 13 percent. When January is down, the year is up only 42 percent of the time and the S&P 500 has an average decline of 2.3 percent. There are a couple more days to determine the official results for January, so let’s focus on the first five trading days of the year.

When the first five days of the year have been up, the year is up 74.1 percent of the time with an average return of 10.4. When the first five days of January have been down, the year is down 50 percent of the time (a coin toss) with an average return of 1.5 percent.

The S&P 500 returned a positive 2.5 percent in the first five trading days of 2013. As we all know, the S&P 500 went on to post strong positive results for the rest of the year.

So, what is the market telling us so far in 2014?  The first five trading days of 2014 resulted in a negative 0.55 percent total return for the S&P 500. Historically, these results indicate a 50 percent chance of a market decline, so 2014 is a coin toss at this point. This is not a major sign for negative or positive market movement in 2014. However, what it likely signals is a year that will be marked by flatter returns, therefore positioning will be very important. Seeking areas with ongoing growth opportunity and quality business models should prove positive.

 

 

 

The views expressed herein are exclusively those of CLS Investments, LLC and are not meant as investment advice, and are subject to change. No part of this report may be reproduced in any manner without the written permission of CLS Investments, LLC. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice.  This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. There is no guarantee that any investment program or account will be profitable or will not incur loss. Investors should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Individual client accounts may vary. Client scenarios given in this presentation are given for informational purposes only and are not representative of any actual client account. This material does not constitute an offer to sell, solicitation of an offer to buy, recommendation to buy or representation as to the suitability or appropriateness of any security, financial product or instrument. The S&P 500 Index is an unmanaged composite of 500-large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. The Russell 2000 Index is an unmanaged index that is a widely recognized indicator of small capitalization company performance. The Barclays Capital U.S. Aggregate Bond Index covers the USD-denominated, investment-grade, fixed-rate, taxable bond market of SEC-registered securities. The MSCI ACWI ex US Index is an index considered representative of stock markets of developed and emerging markets, excluding those of the U.S. The Barclays Capital 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. You cannot invest directly in an index.

0180-CLS-1/27/2014

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