A market theory that has developed over the years is called the January barometer. The theory basically asserts that whatever happens in the financial markets in January is a precursor for what will happen over the rest of the year. Unfortunately, January started the New Year with volatility – just a timely reminder that whatever goes up must correspondingly go down at some point, at least where the financial markets and global economy are concerned.
Many industry insiders see the recent sell-off in the Dow Jones Industrial Average Index and S&P 500 Index as an anticipated correction. Rather than cause for concern, it can be viewed as a short-term and healthy pause.
[CLICK HERE to read the article, “The January Barometer,” at Fidelity Investments, Feb. 6, 2014.]
Some have correlated the January drop with the weather, notably the “Polar Vortex” that struck nearly every corner of the U.S. during the first month of the year. Unseasonably cold temperatures are reported to have impacted manufacturing production, with the biggest growth slowdown in factory new orders since 1980. The weather has also been blamed for dismal numbers in job growth since the first of the year. It appears this meteorological connection lends a whole new meaning to the term ‘January Barometer.’
[CLICK HERE to read the article, “Pinning down the January effect on U.S. jobs figures,” at Reuters, Feb. 7, 2014.]
[CLICK HERE to read the article, “Disconnect in the January Effect,” at Nasdaq.com, Jan. 11, 2014.]
[CLICK HERE to read the article, “January 2014: cold and snowy compared to average, plus a polar vortex attack,” at The Washington Post, Feb. 3, 2014.]
In the U.S., we tend to be challenged by our energy reliance on global oil resources. But elsewhere in the world – particularly emerging markets – they rely on global capital investment to help fuel those economies. Now that the U.S. has resumed its upward growth path, much of that capital is coming back home, and some emerging countries will be challenged. The bright spots are those that rely more on their growing domestic consumption demand, such as India and the Philippines, rather than external capital – such as Turkey.
While U.S. economic policies may influence some emerging nations over the short term, underlying fundamentals such as rising consumer wealth, positive demographics, and untapped economic potential will likely remain intact for the long term.
[CLICK HERE to read the article, “Emerging Markets: Fighting the Tide,” at Fidelity Investments, Feb. 5, 2014.]
[CLICK HERE to read the article, “Emerging Market Worries Re-emerge,” at Guggenheim Investments, Feb. 3, 2014.]
The reality is that regardless of the factors that influence the U.S. economy or the rest of the world, each of us needs to work toward insulating our own financial situation from the impact of external factors. When it comes to household savings and spending, blaming the weather kind of sounds like a fourth grader telling his teacher that the family Doberman ate his homework. If you’d like help taking a proactive approach to help protect* you from the effects of January – or any other audacious month of the year – please give us a call.
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By contacting us, you may be offered information regarding the purchase of insurance products.
These articles are being provided to for informational purposes only and should not be used as the basis for any financial decisions. While we believe this information to be correct, we do not guarantee the accuracy or completeness of the information included. All clients are encouraged to consult qualified tax and legal professionals before making any decisions about your personal situation.