As January Goes, So Goes the Year?
U.S. stocks posted strong gains in January, as the Dow Jones Industrial Average continued to trade near an all-time high.
The Dow rose nearly a thousand points or 5.77 percent in the first month of 2013, logging its best January performance since 1994. Similarly, the S&P 500 gained 5.05 percent, its largest increase since 1997.
With the markets on a roll, will the 'January Effect' last through the end of the year? Since 1950, the January barometer predicted the year's course with 81 percent accuracy.
In fact, the correlation is even stronger when the market finishes January in the black, proceeding with full-year gains 90 percent of the time.
Consider the the last five decades, for example, when there were 11 other instances, when the S&P 500 rose at least 5 percent.
In all of those years, with the exception of 1987, the index recorded double-digit gains of at least 16 percent.
Even in 1987, which is the year when stock markets around the world crashed in an event also known as 'Black Monday', the S&P 500 managed to finish the year positive, up 2 percent.
S&P January and Year End Gains
| Year | Jan. Gain | Year Gain |
| 1951 | 6.02% | 16.35% |
| 1954 | 5.12% | 45.02% |
| 1961 | 6.32% | 23.13% |
| 1967 | 7.82% | 20.09% |
| 1975 | 12.28% | 31.55% |
| 1976 | 11.83% | 19.15% |
| 1980 | 5.76% | 25.77% |
| 1985 | 7.41% | 26.33% |
| 1987 | 13.18% | 2.03% |
| 1989 | 7.11% | 27.25% |
| 1997 | 6.13% | 31.01% |
| 2013 | 5.31% | ??? |
| Average | 24.33% |
