While it's still far too early to tell, 2009 is not exactly shaping up as a rebound year for stocks. The recently completed month of January witnessed declines in the Dow and the S&P 500 of 8.8% and 8.6%, respectively. That performance makes January 2009 the worst January for stocks on record.
Right now, some of our readers are probably thinking, "One bad month does not an entire year make." (I'm speaking specifically about any reader who happens to be a Confucian scholar. Or writes fortune cookies for a living.) They are correct. However, based upon historical data going back to 1950, a bad January tends to bode ill for the rest of the year.
According to Ned Davis research, when the S&P declines in January, the index loses an average of 2.4% in the next 11 months. When the S&P climbs in January, the index posts an average gain of 12.3% in the next period.
Despite all of this, I can't help but shake the feeling that we're nearing a bottom, valuation-wise. Before I proclaim an outright "buy" signal, I'd like to see the S&P 500 test (and bounce back from) its recent lows, in the 750-775 area. Bear in mind that the market tends to rebound prior to an economic turnaround. Therefore, while it increasingly appears that the recession will extend at least until the end of 2009, we could see a stock market rebound sometime before then. More on that in the near future. Maybe.
1 comment:
I wish I could be as optimistic as you
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