January has certainly brought record-breaking cold weather to the Northeast, with some areas experiencing temperatures never felt before. The market, however, continues its hot streak.
As we hopefully move away from this cold spell and the weather starts to warm up, we will also be looking at January seasonal patterns in the S&P 500 Index that could help to keep your portfolio warm should the market cool off.
January tends to be a mixed bag for equity market seasonal patterns. In fact, for those who follow these statistics, looking back over the past 20 years, there could be a 50% likelihood that stocks could move higher during this month.
Our latest analysis identified a variety of sectors that showed a seasonal tendency to outperform the S&P 500 during January over the last 20 years—a month when the index has on average moved lower by 0.7%, generating positive returns 50% of the time. As we review the data, it’s important to note that nonseasonal factors still influence performance and should not be ignored.
The table below highlights sectors’ average over- and under-performance versus the S&P 500 during January since 1998, as well as the top-performing industry groups over the same time period:
The information technology, healthcare, utilities, and consumer discretionary sectors have on average tended to exhibit the highest relative strength. However, if you are interested in looking under the hood for a more targeted strategy, out of the top 10 industry groups, you may want to consider the information technology, consumer discretionary, and healthcare sectors as they have represented seasonally strong breadth for select industry categories in the month of January over the period analyzed. As we start 2018, we can shift our thoughts away from the frigid temperatures to the warmth of the equity markets. But should stocks hit a cold spell this month after a hot start, let us warm up to the seasonal statistics that we tend to see in January—as well as the possibility that it could be a good time to consider implementing this type of analysis as part of your portfolio management plan.