Let me tell you about the real January effect. Many pension and retirement funds only reshuffle weightings between different asset classes once a year, mostly in January. That has created a temporary surge of stock buying and bond selling that exhausts itself by the middle of the month. After that, the market sells off. During the second half of January in 2009, the S&P 500 dropped by 3.5%, in 2010 it plunged 5.9%, and in 2011 it pared back 0.54%.
Will history repeat itself a fourth time? The global economy is facing certain slowdowns in Europe, China, and India. The bull run in equities is rapidly approaching the advanced age of four months, long in the tooth by recent standards. I am betting that it will, but will keep my short positions small until I’m sure. The next bad headline from Europe will be the trigger.
Is the Bull Market Now a Senior Citizen?