As goes January, so goes the year.
An old Wall Street adage says that when stocks have a good January, they usually end up having a good year. And that idea can be taken a step further. The sectors that do best in January usually end up performing best over the full year.
Last year, financial stocks jumped 8 percent in January and outpaced the 4 percent rise of the Standard & Poor’s 500 index. Over the full year, they surged 26 percent, double the 13 percent rise of the index.
Although there isn’t a clear reason for the pattern, it happens more often than not. S&P Capital IQ strategist Sam Stovall found that since 1990, the three best performing sectors in January went on to beat the S&P 500 index 61 percent of the time.
To be sure, the predictor isn’t perfect. Last January, raw material producer stocks led the 10 sectors that make up the S&P 500. They rose 11 percent in January but finished the year with just a 12 percent gain, which was less than the broader market.
If the January predictor holds this year, look for gains from the energy industry (up roughly 8 percent), health care (up 7 percent) and financials (up nearly 6 percent). They were the best sectors in the S&P 500, which had its best January since 1997 with a 5 percent gain.Associated Press