The Investment Scientist

Archive for January 2023

“The January Effect” refers to two phenomena in the stock market that elude good explanation: 

  1. The market tends to perform exceptionally well in January.
  2. The market’s January return tends to predict the rest of the year. That is, if we have a good return in January, it is more than likely that we will have a good return for the whole year.

In recent years, however, people have been saying that the January Effect is weakening. So today I am going to revisit these two phenomena using the S&P 500 return data from the last 10 years. In the table below, I calculated the January returns (and the annual returns) from 2013 to 2022 and arranged them from the lowest to the highest. 

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My dad turned 90 recently and he can still do this move: He can sit down on the floor with his legs crossed and can stand up again without using his hands to assist him. Try it yourself and see if you can do that. It turns out that this simple test predicts your longevity. People who can get up unassisted will live many years longer than people who can not. 

My mother is five years younger than my dad. In contrast to my dad, she can barely walk on a flat floor. Usually, she shuffles and she is so unstable that I am afraid a tiny coin on the floor could trip her up. 

Judging by the way they walk, my dad looks like he is 60, and my mom 90. 

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Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.

Twitter: @mzhuang

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