Click here for the PDF: The Monthly February 2024

 

With this commentary, we plan to communicate with you every month about our thoughts on the markets, some snapshots of metrics, a section on behavioral investing and finally an update on MacNicol & Associates Asset Management (MAAM). We hope you enjoy this information, and it allows you to better understand what we see going on in the marketplace.

 

 “By the time I became chairman and there was more of a feeling of urgency, there was a willingness to accept more forceful measures to try to deal with the inflation.”

Paul Volcker, 12th Chairman of the US Federal Reserve

 

The November-December affect…

I am not big on folklore; most Portfolio Managers I would imagine probably aren’t. In our line of work, stories can get you far, skepticism even further than that. Wall Street folklore suggests that if stock prices rise in January, they will likely finish the rest of the year on a positive note too. Referred to as the January Effect, this basic yet frankly good barometer of how stock prices can perform following a strong start to the year has not only a solid track record but a worldwide following. I studied the January Effect in greater detail about two weeks ago and looking into it was easy. Shortly before embarking on his own trip to Miami, David was kind enough to hand me the latest edition of the Stock Trader’s Almanac. Like any almanac, the one for Stock Traders is more about record keeping (facts) and less about inferences, though the interferences one can make in this case are pretty good. The 80-year-old gauge on expected stock prices has been right roughly 70% of the time. If stocks do well in January there is more than a two-out-of-three chance that they do well for the year. The question I have, and which I invite you to ponder, is whether January did this all on its own, or, whether the momentum stocks built up in November and December affected the veracity or predictive power of January’s numbers?