Will investors get a boost from the 'January Effect' this year?

As the New Year rolls in; many an eye will be firmly fixed on how the markets will fare in January and whether it will set the tone for the rest of the year. 

This is significant as a positive start to the year has led to further rises for the remainder of the year 79% of the time since 1984.

Analysis from Fidelity International shows that since the inception of the FTSE 100 in 1984 the index has risen in the first month of the year in 19 out of 32 years. In all but four of these, the UK benchmark has gone on to record a further gain between February and December. That’s a 79% success rate, which suggests that there might be more to this than mere chance.

The ‘January Effect’ describes the tendency for positive markets in the first month of the calendar year to lead to positive markets in the subsequent 11 months.

Tom Stevenson adds: “As far as short term buy signals go, the ‘January Effect’ seems to have a reasonably reliable hit rate. However, as 2015 has shown, such adages should not be solely relied upon when making investment decisions. Instead, investors should focus on sound investment principles such as staying invested through the cycle, saving regularly and being well diversified across asset classes and geographies.”