The January Effect

Posted by Pierre Gendreau in General News with no response yet

We are about half way through January and many analysts, investors and market enthusiasts are wondering which way that markets are headed. Typically, the markets go through the “January Effect” which is a general increase in stock prices during the month of January. This rally is generally attributed to an increase in buying, which follows the drop in price that typically happens in December when investors, seeking to create tax losses to offset capital gains, prompt a sell-off. For 2014, this move has been less evident, as a matter of fact, the markets have been flat for the US and Europe (expect Greece) where as Asia has been down. What is going this January? Could it be that many investors are re-balancing their portfolios by selling part of their profits from 2013 in stock and re-allocating the proceeds to bonds? January is a common time for re-balancing and tax harvesting. The S&P 500 gave us about 30% returns in 2013 and profit taking is common to lock in some of those gains. Will 2014 bring us similar returns to 2013?

 

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