S&P500s January Gains, A Sign Of Things To Come?
A Wall Street adage goes as follows “So goes January, goes the year”. Meaning, January played out well and so will the rest of the year.
Since 1950, there have only been 9 contradictions to the January Barometer which was founded by Yale Hirsch, the latest being 2018. January returned 6% on the S&P500, but annually it was down over 10%. In January this year, the index returned 7.26%!
There will be many risk events during the year which traders and investors will have to be concerned of, but there are certainly “risk on” events that will help the market; one being the recent optimism of a renewed trade deal with China. Projected earnings for 2019 have come down slightly, from an estimated 10% in October last year, to 6.8% estimates at the start of the year.
So who are the big potential losers in 2019? Technology & Energy! The technology sector has cut its estimates by half, from 5.2% in November to 2.6% in January. However, 2019 looks like a very dim year for the energy sector, with November 2018 estimates were up at 21.3%, however now at a miserable 5.6% in January 2019.
What does this mean for the year ahead?
I feel we are going to see a story of “buy the rumours” and “sell the facts”. A lot of optimism has been baked into the chart already as we make our way back towards all-time highs. A lot is riding on a China and US trade deal and the implications this could have on the market. A renegotiated deal could see the S&P500 climb back to all-time highs, but further trade spats and no real progress could consolidate the market and even push it back towards the lows of 2400.00.
Only time will tell for now......