Month: January 2018

The two sides of January

Most investors have heard of the January Effect which is the observation that January has historically been one of the best months to be invested in stocks. However there is another January Effect which states that, “as goes January, so goes the year”. While January has produced positive performance 66% of the time between 1968 and 2017 for the S&P/TSX Stock Index, it has also produced negative performance one-third of the time.


What is striking is that in years when January had a positive return, those returns were well above average relative to the returns in other months of the positive January years. For example, of the 33 Januarys with positive performance, the S&P/TSX was up an average of 4.3%. The next best performing month in those years, as can be seen in the table to the left, was December which returned half that amount at 2.1%. Conversely, when January had negative returns, -3.5% on average; the remainder of the months of the down January years produced better returns. Although in total only 7 months had positive returns, they were more than enough to lift the overall years performance into positive territory but still well behind the 50 year average market performance and still further behind the years where stocks came roaring out of the gate in January.The chart below depicts the average annual cumulative returns for months that had positive Januarys and negative Januarys net of the S&P/TSX average annual return for the period. While the relative performance between good and bad months of January time periods did narrow over the course of the year, it clearly shows that the opening month of the year often sets the pace and influences the remaining months of the year. We then looked at how these markets performed for the full year. In those years where January was positive the S&P/TSX (including dividends) returned 12.6% versus an average of 10.7% for all 50 years reviewed; a 17.8% improvement. On the other hand, negative Januarys underperformed the market as a whole by -39.3%. These numbers confirm that “as goes January, so goes the year”, translating into above or below average annual performance in those years.

The most widely accepted explanation for the January Effect is tax-loss selling. The tax circumstances of taxable investors are often more important than a security’s fundamental valuation, as such investors will sell whatever securities are required at the end of the calendar year to establish capital losses for income tax purposes and then repurchase the shares after a prescribed waiting period. As the waiting period most often expires early in the next year, the repurchase orders flood the market in January, hence creating abnormal returns in the month. In addition to tax issues, researchers have also suggested other reasons for the January effect. One is “window-dressing”, as portfolio managers unload their embarrassing stocks at year-end so that they don’t appear on their annual report, and then redeploy the proceeds in January. Another reason, which we may see more of in 2018, is short sellers covering their successful short positions early in the next year so they usually do not have to pay taxes on the gains until April of the following year.

Whatever the explanation, predicting the future is impossible (even if it is only one month’s prospects), but it is good to know the end result is just a question of how large the annual gain will be on average. Because it is clear that investors should not be out of the market if January is a good or bad month because the returns over the rest of the year are just a question of magnitude. Of course one must always bear in mind that past performance does not mean this trend will continue. It will be interesting to see how it plays out in 2018.

Market Data


This report may contain forward looking statements. Forward looking statements are not guarantees of future performance as actual events and results could differ materially from those expressed or implied. The information in this publication does not constitute investment advice by Provisus Wealth Management Limited and is provided for informational purposes only and therefore is not an offer to buy or sell securities. Past performance may not be indicative of future results.

While every effort has been made to ensure the correctness of the numbers and data presented, Provisus Wealth Management does not warrant the accuracy of the data in this publication. This publication is for informational purposes only

Good goals: they aren’t just for clients!

It is not a surprise that when January is mentioned, “goal setting” is often also used in the same sentence. Yes, it seems like a cliché to set goals as the new year rolls around, but there is something to be said for starting a new year with a solid new plan.

As advisors, we are often setting goals with our clients. We use our expertise to assist them in creating a well thought out plan that will help them achieve success. When you are so busy helping others with their goals, it is undoubtedly difficult to take a step back and set some of your own.

We know people who give advice for a living are not usually the best at taking it, which is why we created this short list of tips to set good, attainable goals this year to improve yourself and your business in 2018.

Tip #1

Your business goals need to align with your personal goals. This means that your goals for your business must make sense for where you are in your personal life. For example, if you are at the retirement stage of life, your goals should reflect this and be based upon the smooth transition out of your business. In contrast, if you are new to the business and just starting out, your goals need to be challenging but not out of the realm of possibility.

Tip #2

Let your team know about your goals. Make communicating to the team a priority. This not only helps keep you accountable, but it also inspires those around you to do the same. Keeping everyone motivated is key to any businesses success and a great way to do this is to encourage those around you by sharing your own plans for improvement.

Tip #3

Good goals are widespread; they do not just focus on one area. It can be difficult for someone with an entrepreneurial inclined mind to not limit your goal setting to numbers; trying to achieve a certain volume of sales. This would be doing yourself and your business a disservice. Yes, they are important, but it is also important to improve other areas of your business, such as your communication, administration and work environment.

Tip #4

Review your goals often. It can be easy, as work piles up and the months go by, for the goals you set in January to become forgotten. Setting time aside each month can be difficult, but it is so important in ensuring you are successful. It is not enough to set goals and forget about them. Active goal management should be part of your agenda to consistently review your progress and set you up for attainability.

Instead of letting another goal-less year go by, cease your opportunity this January to set yourself up for success. Being proactive in this endeavour improves yourself and your practice. Good luck and all the best in the year to come!