Will This Month Foretell What Stocks Do in '87?
According to stock-market lore, this is a special month -- a month when the market's movement usually predicts its direction for the entire year. But should an investor bet money on it?</br></br>Veteran market commentator Yale Hirsch, who coined the term "January barometer," says the indicator deserves serious consideration. "It's just incredible how the January barometer has consistently predicted the annual course of the stock market since 1950," he writes in the 1987 edition of his annual Stock Trader's Almanac. "I know of no other indicator that comes within a country mile of matching (its) forecasting record."</br></br>Mr. Hirsch points out that since 1950 there have been 19 Januarys in which the Standard & Poor's 500 index rose by more than 1%. In all 19 cases, he says, the increase was followed by a gain in the S&P for the entire year, ranging from a low of 9.1% in 1965 to a high of 45% in 1954. The barometer, he argues, has predicted almost all major advances and declines.</br></br>But the critics aren't impressed. As they see it, the January barometer is nothing more than an old wives' tale.</br></br>"The market itself has been in a strong upward trend for the past 70 years," observes Mark Hulbert, editor of the Hulbert Financial Digest newsletter. As a result, the odds are that any given January will show gains, and so will any given year. So it's hardly surprising, Mr. Hulbert says, that January seems "to have a good record as a bullish indicator."