As we approach the New Year, you will often hear mention of the "New Year rally", which has seen stock markets perform relatively well in the first four weeks of the New Year. Is this one of those issues that have become self-fulfilling? Is it true, or is it simply a myth?
We will look at five leading indices in the first month of 2023, 2017 and 2012 to see whether the so-called "New Year rally" is fact or fiction.
Nikkei Index
Even though the Japanese economy has been under pressure for some time, the Nikkei Index is still one of the more recognised indices in the world. So, did we see a New Year rally in recent years?
· 2023, the index was up 4.72%
· 2017, the index was down 0.38%
· 2012, the index was up 4.10%
· Average over the three periods, up 2.82% in January
Hang Seng Index
The Hang Seng Index has become more prevalent in recent years due to geopolitical changes and the Hong Kong authorities' welcoming attitude toward traditional and innovative investment vehicles. The figures for the Hang Seng Index are as follows:-
· 2023, the index was up 10.42%
· 2017, the index was up 6.18%
· 2012, the index was up 10.61%
· Average over the three periods, up 9.07% in January
FTSE 100 Index
Recognised as one of the leading indices in the world, the FTSE 100 Index is currently struggling compared to European and US counterparts. But what was the FTSE 100 Index track record for the mythical New Year rally?
· 2023, the index was up 4.29%%
· 2017, the index was down 0.61%
· 2012, the index was up 1.96%
· Average over the three periods, up 1.88% in January
DJIA Index
The DJIA Index is the first index that international investors tend to consider as a means of gauging global market sentiment and direction. So, what has been the track record in January?
· 2023, the index was up 2.83%
· 2017, the index was up 0.51%
· 2012, the index was up 3.40%
· Average over the three periods, up 2.25% in January
NASDAQ Index
The indicator for global technology shares, the NASDAQ index, has proved extremely popular in recent years. Prone to excess volatility, how has the index performed in January in the three periods in question?
· 2023, the index was up 10.68%
· 2017, the index was up 4.30%
· 2012, the index was up 8.01%
· Average over the three periods, up 7.67% in January
While we have chosen these years at random, from the above figures, the best-performing indices in January were as follows:-
· Hang Seng index
· NASDAQ index
· Nikkei index
· Dow Jones Industrial Average index
· FTSE 100 index
Summary
While historical figures are not indicative of the future, and many other factors will impact market movements, January has, on the whole, been a relatively positive month for stock markets. Maybe investors are more positive as we approach the New Year with a more upbeat outlook; it may genuinely be that economies get a lift from enhanced consumer exuberance as we come off the back of the festive period. Who knows?
Will January 2024 repeat this interesting pattern? We will soon find out!