I could be wrong, but after Wall Street had its worse week since November 2011, it now looks like the overdue pullback, or correction, has a really good chance of happening. So, how panicky should you be? And does this lousy start to the year mean it’s likely that this could be a down year?
Historically speaking, the first two years of a Presidential term are worse than the last two – it could be an election thing! Also, mid-term election years aren’t great for stocks. And then there’s the January Effect, which says if January is down it does not augur well for the rest of the year – “as January goes, so goes the rest of the year.”
Well, the actual history of this relationship keeps me positive on stocks for 2014. Economist Ed Yardeni has looked at 67 years of January closes and the stock-year that followed and it only works 55% of the time or just under one in two times.