After a 2009 that turned out to be surprisingly positive for most investors, can we look forward to that momentum carrying over into 2010? Unfortunately, there's no indication of such a phenomenon. Veteran stock-watcher Mark Hulbert looked into the possibility of a carry-over factor for annual stock returns for the New York Times, and found that in years after the Dow posted an annual gain, there was a 64 percent chance that the index would post another positive year.
That sounds great - except that in those years when the Dow didn't post a gain, there was a 65 percent chance of following that up with a year in positive territory. In other words, as far as what happens in the next year, there's no distinction to be made between up years and down years. (But the good news, you may have noticed, is that the Dow rises in almost two thirds of all calendar years.)
One area in which Hulbert did find some evidence of year-to-year momentum: small caps. After years in which small-cap stocks outperform the rest of the market, they continue to beat large-cap stocks by an average of 6.5 percentage points. Something to think about for 2010.
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