RED START OF 2014

All markets tumbled yesterday on the first trading day of 2014. US indices ended the first day of the year with the biggest loss since 2008 and SP500 made the biggest daily downswing in over three weeks, with -0,89%. Since 2000 have been seven years with a negative first trading day.

What does that mean?

Nothing at all. One day means nothing, but five days means nothing neither. There are many smart statistical oriented analyst who think it is possible to predict from the first five days of the year. But that is crap.

There is not any correlation between the first day and the full year performance – it is only 50%. Better if you flip the coin. The first five days of trading cannot tell you anything neither. Remember 2013 January, only one day was out first five good day and the year did the best annual return since 1986. Consider that, no sense what happens in the first five days of January. There are 65% chance that the market will rise through year if the first five days are positive.

The whole month – January – shows something and indicate better a bit. How goes January 73% of the time goes the whole year. January is better predictive.

What we might be sure about the market recently is strongly bullish and the era of super low cheap money and super low interest rates are making the markets pretty attractive.

The BFM Assets Team.