The Investment Scientist

New York Stock Exchange

With the market up about 5% in January, a prospective client of mine called to let me know he is not going to invest in stocks at this time – in fact, he is going to pull all of his money out of the market.

This may not be the best course of action for him.

According to research done by Cooper and McConnell, what the market does in January has a strong predictive power for what the market will do for the rest of the year.

Using data since 1940, they found that if the market is up in January, it will rise an additional 14.8% for the rest of the year; if the market is down in January, it will rise only 2.92% for the rest of the year. This gives rise to a spread of almost 12%, a highly statistically significant number.

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