The 'January Effect' Worked In 2019 For Everything

by: Ronald Surz

The “January Effect” predicts good performance in January.

It’s attributed to the bounce-back that follows tax loss harvesting in December.

It’s predicted to favor smaller companies over larger.

As shown in the following graph of Russell index returns for January, 2019, the broad U.S. market earned a sweet 8.6% return, led by an 11.91% return in small growth companies. At the low end of the spectrum, large value companies earned “only” 6.62%. Last year at this time Perry Kaufman documented the history of the January effect and its predictive power for the remainder of the year in his The After-January Effect. It’s a coin flip that came up good this year for all asset classes, not just stocks.

Russell Index Returns for January 2019

In his Major Asset Classes: January 2019 Performance Review, James Picerno reports that all major asset classes had a good January, as shown in the following graph.

One in a row

What are your thoughts? Is this gain a harbinger of more to come, a simple bounce-back from December’s losses, or a sucker tease?

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.