A few weeks ago, I described the stock market January Effect test as an indicator of the probable direction of indexes for the rest of 2017. Since one-twelfth of the year has zoomed by, let’s look to see what happened. By the way, the indicator is infinitely more accurate than Punxsutawney Phil with his weather forecasting gig in spite of last year’s non-compliance.
The performance of the first five days was positive, and this is useful as an early warning indicator. All three primary indices, the S&P 500, Dow Jones 30 Industrials, and the Nasdaq 100, were positive. The Nasdaq flew out of the new year’s gate and has not really slowed down.
Through the 31st, the tech-heavy Nasdaq 100 gained over 5 percent. The S&P 500 came in second, up 1.79 percent, and the Dow Industrial Average took a relative breather and its fast and furious uptrend during November, higher by .51 percent.
In an unusual fit of brevity, I will close by saying that with over 80 percent accuracy in recent decades, this indicator bodes extremely well for the rest of 2017 and its financial equity U.S. markets. There is nothing in the general economic climate to put a damper on this current outlook.
When it fails to correctly predict a good market for the succeeding eleven months, an external shock is often to blame. A shooting war or a major terrorist event can derail the optimism that seems to be breaking out concerning the U.S. economy. And as I think I will become most tired of hearing, we could be only a tweet away from a misstep.
(Statistics are from Worden Brothers, Inc., TC2000, 2017. Past performance is no guarantee of future results. Advice is intended to be general in nature.)
Ron Finke is president of Stewardship Capital in Independence. He is a registered investment adviser. Reach him at email@example.com.