Hello Legacy Wealth Alliance Family,
There is a well-known barometer in the capital markets that states “As goes January, so goes the year”. For those of you who are hearing this statement for perhaps the first time, this is another way of saying how the market performs in January is how it is historically likely to perform for the year. Whether the reason behind this phenomenon is investor sentiment or maybe even self-perceived momentum, we may not know. We do know that since 1928, the S&P 500 has had 92 instances where this barometer has been tested. In 64 of those years, the market closed in the same direction that January did (1). By comparison, all other months other than January were significantly less likely to be as closely correlated. As of this letter and four weeks into the new year, the S&P 500 is up approximately 0.60% (2); so far, so good. What does this mean to many of you as individual accumulators of wealth? Probably nothing. Maybe the more important pattern to focus on, and something we like to remind you of as often as possible, is that markets over long periods of time, go up much more than they go down.
For me personally, I can only hope as January goes, so goes the rest of my years. On January 1st, I mustered up the courage to propose to my girlfriend and best friend of three and half years on the beaches of Torrey Pines in San Diego. Emma, to my jubilation said YES! As an individual who is a planner by nature, I wanted to create the perfect, and memorable moment but was at a loss how best to do this. Especially with the ongoing COVID shutdowns. When Emma sat me down one night in early December and informed me that she was planning on taking a 13-week travel-nursing contract in San Diego beginning in January, it hit me in the head like the brick from Kevin McAllister of Home Alone 2 – I cannot live without this person in my life. Right then and there I knew that January 1st would be the day I bent the knee. New Year’s Eve, we packed up her belongings along with our 2-year-old dog Eddy and moved out to her temporary home in the North Park neighborhood of San Diego. That long weekend could not have been any better other than it came to an end with me flying back to Phoenix by myself. Although I never foresaw that our engagement would begin with a stretch of time apart, I have never been more confident and excited about our future. For those of you that are wondering, it takes exactly 5 hours to drive from Phoenix to San Diego and YES, I’ve completed this drive twice in the past 4 weeks.
Back to the Markets
Global stock markets have pushed to yet another round of new all-time highs this week with the S&P 500 closing on Monday, January 25th at 3,855.36 (2). For context, Monday’s close represented a 1,617.96-point rise, or approximately +72.3% (2), from the depths of the ‘Pandemic Panic’ bottoming out on March 23rd of last year. The NEWEST bull market is alive and well. We are frequently asked by clients how long will a bull market continue? The best answer to this question remains, we do not know. We will be in a bull market, until we are not. Had you decided back in March of last year that the near -35% downturn in just over 1-month was a good time to sell out of your equity portfolio, you may have missed out on this as impressive rebound and turned ‘paper losses’ from 2020 Q1 into permanent losses. You see the real difficulty of trying to time the market is not when do I get out? You may have already guessed that it is when is it safe to get back in? Moving on, here are some reasons we continue to believe in the 2020/2021 bull:
- Interest rates remain at historically low levels at least through the remainder of 2021
- The economy is expected to expand at its fastest pace in decades this year
- The Federal Reserve is keeping money supply high and short-term interest rates low, and
- More fiscal stimulus is coming
In the same breath, there are always reasons for investors to remember to proceed with caution:
- Equity valuations are high (highest ever in some cases)
- Interest rates and inflation expectations have been moving higher in recent months, and
- Investor sentiment by some measures is too high (remember the dot.com bubble?)
All things considered, the best way to continue to invest is to always take on the amount of risk you are comfortable with – especially in up-markets, remain diversified, and remember that you have a wonderful team at Legacy Wealth Alliance that is here to help you through any moments of turbulence! We want to thank you all for the continued trust you place with us each day by allowing us to help you continue down the path of financial success for you and your loved ones. Wishing you all the best in the New Year and remember, if you need some momentum to get your January going give our office a call.
Jon Launder, CFP®
(1) Investopedia, January Barometer by Gordon Scott 1/1/2020 investopedia.com/january-barometer-4780193
(2) Yahoo Finance S&P 500 History
This information does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may view this information. Statements, opinions, and forecasts made represent a particular observation and assessment of the market environment at a specific point in time and are not intended to be a forecast of future events or a guarantee of future results. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended. Statements regarding future prospects may not be realized and may differ materially from actual events or results. Past performance is not indicative of future performance.
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