JANUARY EFFECT

This barometer tells you that if stocks are up this month, then the rest of the year should be good for stocks. It’s a rule of thumb that has proved remarkably accurate since 1945. If the market was up in January, 84% of the time it continued rallying through the end of the year. Since 1979, the average gain in the S&P 500 for January has been 1.14%.

But this year seems special. Against the conventional definition that the first days of the year are more often positive, yesterday US markets suffered its largest loss in 3 months. This is not the start to 2015 that investors were hoping for. Three factors drove the free fall the strong dollar, low oil price and the huge volatility. Oil plunged below $50 for the first time since April 2009 and the dollar rose as the euro traded below 1.20.

• SP500 -1.81%
• Dow -1.86%
• Nasdaq -1.56%

The losses were truly breathtaking. The S&P 500 is down 3.4 percent over the past five sessions, the longest losing streak in 13 months. It is negative for the Santa Claus rally period for the first time since 2007.

What is going to happen now? We have to be more cautious, these types of anxiety don’t go away overnight. We'll have to see. The big question is do you buy dips or not yet?

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The BFM Assets Team.