With January now in the books its time to look at the always enlightening data from Yale Hirsch over at the Stock Traders Almanac. Mr Hirsch devised the January Barometer back in 1972, which states that as the S&P500 goes in January, so goes the year. The indicator has registered only six major errors since 1950 for a 90% accuracy ratio. What I find interesting is that of the 6 years that were predicted incorrectly, 4 were negative for January and then finished positive for the year. Translation, even though this indicator was wrong in these four years, the market was bullish for the full year. 2009 was one of those years as January closed down 8.6% but the full year return was 23.5%. The S&P500 was up over 2% for the month of January which bodes well for the bulls this year according to the barometer. As you may know, 2011 is also a pre-presidential election year. Full years followed January’s direction in 14 of the last 15 pre-presidential election years. The sole error was in 2003, as a new bull market was beginning. Time will tell if 2011 follows the historical predictions of the January Barometer or the pre-presidential election year trends, but as always, we’ll take all the good news we can get.
Archive for the ‘Resources’ Category
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The Decision Investments Team
We posted the following White Paper on our website in April of 2009 but felt compelled to repost in our new blog. Not only did the market behave as we suggested it might over the last year but the specific strategies we recommended employing are arguably more important to implement now (after the “bounce-back” from over-sold levels) than they were a year ago.
Decision Investments believes that the recent strong performance in the stock market is finally signaling a legitimate end to the worst bear market in 70 years. The stock market is considered to be a “leading indicator” and as such typically moves well in advance of the actual economy. As of this writing, market indexes have moved more than 25% above their March 6th lows suggesting that the domestic economy is likely poised to strengthen over the next six to eight months.
We do, however, believe that the stock market recovery will be long and arduous and that Dow 15,000 is a long, long ways away. More realistically the major markets, after an initial “bounce back” from over-sold levels, will likely experience modest gains followed by a period of consolidation for the foreseeable future. The ultimate goal will be to participate in the recovery to a greater extent than the decline and in doing so attempt to have investment accounts fully recover before the stock market has.
For likeminded individual investors who don’t want to passively wait while being at the mercy of the markets, Decision Investments suggests the following proactive strategies:
1. Dividends… Yield Matters
2. Tactical … Don’t “set it, and forget it”
3. Sector Bets… Be Industrious about your Industries
4. Concentration… Over-diversification is the enemy to performance
5. Bonds … The other white meat