The ‘January effect’

Finally, what of the historical record of market behaviour at the start of the year? Is there a January effect, as Citywire’s Michelle Mcgagh speculated last week?

Records show that a positive performance in January points to further gains over the rest of the year. This has happened 79 per cent of the time since 1984.

Analysis from Fidelity International shows that over those 34 years the FTSE 100 has risen in the first month of the year in 19 of those years and in all but four occasions has gone on to record further gains between February and December.

Says Tom Stevenson, investment director for personal investing at Fidelity, “This is an old stock market adage that states ‘as goes January, so goes the year’. As far as short term buy signals go then, the ‘January effect’ seems to have a reasonably reliable hit rate.”

However, other analysts warn that this trend has tended to weaken since 2000 and in any event the FTSE100’S gain in January despite all the hype is an underwhelming 0.4 per cent.

Nevertheless, a final charge on the FTSE100 at 8,000 looks as likely as not. But given what happened after the long wait for the market to breach 6,000 – greeted with euphoric enthusiasm only for markets to tumble back to 4,300 – private investors may be excused a preference to “pass up” on this occasion.