So goes January goes the year…..?

02Jan09

2009 Brings a New Year for the Market

History would give a big confident “yes” to this question, as market moves in the month of January have nearly always forecasted what’s to be expected through the year. In fact, according to the Stock Trader’s Almanac, an up market in the month of January has led to an overall positive year 90% of the time since 1950. To take the saying one step further, history might say “So goes the first week of January, goes January. So goes January goes the year.” In January 2008 the S&P 500 stumbled, falling a hair more than 6%, and we all know far too well how this year played out.

Does that mean we watch the market closely for the next week to four weeks and react according to these historical trends? Do we buy or sell depending on whether the market moves up or down? The answer here is a mix of “yes and no”. At Sloy, Dahl & Holst we are firm believers in a long term, buy and hold strategy. We believe in diversification, the advantages of owning vs. lending, the importance of paying close attention to history but not necessarily living by it, and the fact that market timing does not work. So where do we go from here, and what do we expect to see moving forward?

The markets have been hammered all through 2008 and look to be wrapping up as the worst year since 1931. Many sectors are off anywhere between 40% to as much as 80% or 90%, as we’ve seen extremely drastic slides from previously set highs as short at 12-18 months ago. Now is the time to be invested if you’re not, and stay invested if you are. As mentioned in a previous blog, “Blink and you may miss the bounce”, the average market return for the first 12 months following a bear market bottom is just shy of 50%. However, it is very important to take it one step further and make sure you’re rebalancing your portfolio since we have seen such drastic changes across the board.

If you don’t believe me, just ask Warren Buffett. For the first time in his illustrious career, Mr. Buffett is moving his personal assets (non Berkshire Hathaway) from U.S. government bonds and buying American stocks. He states “Be fearful when others are greedy, and be greedy when others are fearful. I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.”

So pay attention in the month of January, as it very well might show us what to expect in 2009, but don’t put all of your eggs in that basket alone. The most important thing to focus on right now is to remain invested and stay the course. Make sure you’re rebalancing your portfolio, maintaining good diversification and creating allocation to advantageous sectors for 2009, and beyond.

In mid to late January we will distribute our annual wrap-up newsletter. It will discuss how we faired in 2008, the changes we made throughout the year, what we’re anticipating moving forward and the changes we’re currently making to help our clients remain allocated to advantageous sectors. Please feel free to contact our office if you’d like to receive this newsletter, or if you’d like to discuss this information in greater detail at this time.

I’d like to take one last moment of your time to wish you and your family a wonderful New Year, filled with health and happiness.

Sincerely yours,

Ron Sloy

Learn more about Ron Sloy.

Advertisements


No Responses Yet to “So goes January goes the year…..?”

  1. Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s


%d bloggers like this: