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In One Chart: ‘January effect’ for stocks? Don’t believe it, says this chart

Now that Christmas and the Santa rally stock talk is safely tucked away, investors can look forward to the next round of water-cooler discussions centering on the “January effect.”

It refers to anticipated gains by U.S. stocks simply because it’s the first month of the year. And according to Wolf Richter of the Wolf Street blog, it’s worth paying zero attention to.

As the “January effect” dictates, early-year gains are driven by several “powerful” seasonal anomalies. Included are a bounceback from tax-related selling. This is when buyers return in January with gusto after selling off loser stocks in December to offset capital gains elsewhere, Richter explains.

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