FNArena’s Weekly Insights – January 24 2022

In this week’s Weekly Insights:

-Risks To Consider
-Conviction Calls
-Backlog In Messages

Risks To Consider

By Rudi Filapek-Vandyck, Editor FNArena

Let’s start with the good news. Historical data analysis suggests the final week of January and the first ten trading days into February usually represent a positive experience for the Australian share market.

Data analysis conducted by Hawkeye Analytics grants this period a “win”-rate of 17 from 22 periods.

The not so great news is history is not by definition a reliable guide. Being ‘long’ the ASX200 didn’t work out well in 2016 and 2018, the two years that come immediately to my mind as recent examples of when equities started a new calendar year with lots of doubt and sell-orders.

Believe it or not, it wasn’t such a great period in 2021 either, and that turned out a surprisingly good year for equity investors.

Twenty years ago or so one of the most popular sayings on Wall Street and in and around the ASX building on Sydney’s Bridge street was “so goes January, so goes the rest of the year”. We’ve seen too many concrete examples since that have debunked that popular market myth.

You’d never hear it repeated in the years that started off on a sour note anyway. And some of those years delivered some of the big turnarounds that would offer oversized gains for those portfolios that were ‘in’ the market instead of on the sideline. Think 2016, but also 2009.

Let’s face it, the only reliable conclusion we can draw from the dismal performance of share markets in the opening three weeks of January is that investors have had a re-think about valuations, risks and what can possibly lay ahead.

January is usually a positive month, which is why we can Google the “January-effect”, and it is part of the November-April most profitable seasonal period for markets in many calendar years (but not always).

So let’s have a look at what is weighing on markets’ mind this early in 2022.

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