Stock market January effect
The stock market January effect is where, historically, January ends up being a very good month for the stock market. The key word is historically, the last two January’s, 2008 and 2009 have not gone very well at all.
There are a lot of theories as to why the January effect seems to occur time and time again, I have subscribe to two of the theories. The first is that lots of investors sell in December for tax purposes and therefore buy back their holdings or even more in January. The second is that many likely make a new years resolution to save more and therefore start out strong buying stocks and then start to fizzle out as the year progresses. New years resolutions are made to be broken after all.
The January effect is real but I would not consider it when pondering whether to buy or sell your investments. It does not occur every year and when it does its effects are not powerful enough to make a big difference in your portfolio.