Falling January rarely means a falling year 

In January, the stock markets were dominated by declines and greater volatility. Ultimately S & P500 index fell 5,3 percent, although at the worst moment of the month it was at -11,4 percent. When January brings declines, the rule "what January is like the whole year" checks only 25 percent. cases. When January is upward, this rule holds 58%. situation.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

The energy sector made it possible to earn

The S & P500 index of the 500 largest American companies fell by 5,3 percent, although at the worst moment of this month it was already at -11,4 percent. The average daily price movements amounted to 2,1%, i.e. they were almost twice as strong as in 2021. The energy sector turned out to be the winner of the month with a result of +19 percent. and it was the only industry on the line. The consumer and luxury goods sector fell the most, by 10 percent. The largest drops among companies were recorded by Moderna, Netflix and Etsy. And the company's top oil rises - Halliburton, Occidental, Hess and Exxon.

January barometer (not) working?

It was not the worst January in the history of stock exchanges, even in 2009 the American market fell by 10 percent, and then gained 23 percent throughout the year. So what about the rule that what January is the whole year? The so-called The January Barometer was created in 1972 and popularized by Yale Hirsh, author of Stock Trader Almanac. Its meaning is that the result of the first month of the year determines the result of the full year. This rule is partially true, but it is more true in an uptrend January. Since 1972, the positive stock market performance in January led to a full-year positive figure of 58%. cases. Fall January happened 13 times in total, but only 4 times (i.e. only in 1/3 of the cases) led to a negative year. It was 1981 marked by the US recession, Black Monday 1987, the year of the internet bubble burst in 2000, and the year of the global financial crisis in 2008. At this point, we are not experiencing symptoms of a recession or crash, so our view of the market is moderately optimistic. In the latest cases, in 2019 January saw a decline of 6%, and the American trading floor ended the entire year by 15%. profitable.

The January declines and, at the same time, the good financial results of companies for the fourth quarter of 4, resulted in a 2021% decrease. average C / Z (P / E) ratio on the American floor. Currently, this indicator has dropped below 10, which is a quarter lower than its 20 high. It is still higher than the average value for the last 2020 (5) and 18,5 (10) years. The fair value of this ratio calculated by eToro in the current market situation is 16,7. This is due to the fact that the profitability of companies and their margins are currently at a record high level, the prospects for GDP growth are also good and the profitability of 19-year US bonds remains low.

The financial and energy sectors remain cheap

In the near term, it is best to focus on cheaper sectors and markets. They have the most room for growth in 2022. They also provide a good hedge against downward pressure on companies' valuations related to the prospect of rising interest rates. The energy and financial industries are currently two of the cheapest globally. On the other hand, equities in Europe (including Poland) and China offer P / E levels by 30-45 percent. lower than in the USA.