January Barometer Portfolio Stock Market Prediction
Sam Stovall, chief equity strategist with S&P Capital IQ, has developed the January Barometer Portfolio which looks to sector performances in January for clues of what will happen the following 12 months.
“Since 1990, a portfolio consisting of an equal weighting to the three best performing sectors in January posted a compound annual growth rate of 8% in the following 12 months (February through January), versus 6.6% for the S&P 500, and beat the market in nearly two of every three years,” writes Stovall.
Narrowing down to sub sectors tends to yield even more returns. Stovall adds that “a portfolio consisting of an equal weighting to the 10 S&P 500 sub-industries with the best January performances went on to post a 12-month compound annual growth rate of 14.4% versus 6.8% for the S&P 500 (excluding dividends),” according to data since 1970. “What’s more, this January Barometer Portfolio of sub-industries beat the market nearly 70% of the time.”