In eight of the past 10 years, January’s stockmarket performance has provided a strong guide to the performance of the Australian equity market during the full calendar year.
In eight of the past 10 years, January’s stockmarket performance has provided a strong guide to the performance of the Australian equity market during the full calendar year.
Navigator today issued research findings illustrating this relationship. Stuart Fechner, Navigator Research Manager, says figures from the last 10 years, seem to support the idea that January performance might be an indicator of performance outcomes for the full year.
"We found that if January is a positive performing month for the equity market, the full year result is also likely to be positive and equally if January provides a negative return, a negative outcome is likely for the full year," Stuart said.
Navigator has analysed the historical validity of this relationship, using the S&P/ASX 300 Accumulation Index, finding over several different time frames this relationship holds true more often than it fails.
- Last five years 60% accurate (3 in five years)
- Last ten years 80% accurate (8 in ten years)
- Last 18 years 56% accurate (10 in 18 years)
"While it would not be appropriate to use this relationship as the basis for any investment strategy, it is interesting to note the recurrence of this relationship over the past 10 years," added Stuart.
And, for 2004, January’s performance of Australian equities measured by the S&P/ASX 300 Accumulation Index provided a loss of 0.79 per cent. According to Stuart analysts who subscribe to this relationship performance will tell you the year isn’t looking good – but time will tell.
Stuart stresses that while this is an interesting investment market observation there are unfortunately no magical investment strategies, at least that we know of, which work all of the time."
"Investors should seek out independent financial advice before committing to an investment strategy," Stuart said.
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Notes to editors:
- Performance figures utilised are those provided by the following indices
- S&P/ASX All Ordinaries Accumulation Index
- MSCI World ex Australia Net Index in $A
- UBSWA Composite Bond All Maturities Index (Commonwealth Bank Bond Index prior to 30/9/89)
- Citigroup World ex Australia Government Bond Index in $A (hedged)
- S&P/ASX 200 Property Trust Accumulation Index
- UBSWA 90 Day Bank Bill Index
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