At the end of last year, we saw the customary December rally in the stock markets. Now in the beginning of 2014, there is a January effect to look for: The January barometer, which suggests that however the market performs in the first month of the year is how it will perform for the entire year.
And there's something to this. Dating back to 1928, when the S&P 500 has been up in January, it has been up for the entire year 80 percent of the time, with an average annual return of 13.0 percent. When January has been a down month, the entire year has been positive just 42 percent of the time, and the S&P shows a modest annual decline on average.
The average performance for the S&P over that time has been an increase of 7.5 percent per year, and the index has risen in 66 percent of those years. So the January barometer appears to be significant.
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