In looking at recent stock market performance as I write this post, it appears that the first 4 weeks of January have been pretty good for investors. With the S&P 500 opening the year at 1426.19, and closing on January 29 at 1507.84, the market increased 5.7%. As in, 5.7% in less than one month. Pretty good start to the year!
Actually, January tends to be a pretty good month for stocks based on past history. A look at historical stock returns indicates that over the 40 years ending in 2010, January was the 3rd best month in terms of average return. But what about the next month, February?
Taking a look at the same data, it can be seen that stock market performance in February tends to be less than stellar. Over the same 40 year period, February was one of just 2 months to show an negative average monthly return. The other month happens to be later in the year, when the so-called September Effect on stocks has been seen as a data pattern by some, and showed to be the poorest performing month.
Needless to say, being second worst doesn’t make February a winning month historically based on S&P 500 performance. On top of that track record, we have the January run up to contend with. Not that stocks skyrocketing is a bad thing, obviously. It’s been truly great for many of us, I think we could agree, to see the value of our investments and 401k accounts increase nicely in recent weeks. A market of stampeding buls is a lot more fun than when the bears come out and roar!
But 5.7% in a month? That’s a huge increase in a short period of time. Now, I’m no investment expert, and am not giving any such advice here. Rather, I’m a guy with a blog who happens to be fascinated by personal finance and also tends to view many investment-related things in terms of averages and trends. Just looking at charts of long-term stock performance, one can see that this has been quite a run in the last few years. Also, these extended period of gains don’t last indefinitely.
Something to think about 🙂
My Questions for You
What do you think of where the market is headed?
Do you expect these gains to continue on for a while?
What are your thoughts on February being a historically poor performing month? Why do you think that has been the case, and is it something you would consider in any decisions you make?