January 3rd, 2012
07:58 PM GMT
London (CNN) – Despite the bad prognosis and worrying doomsayers of grim tidings, the new year has got off to a rousing start with London up 2.29%, Frankfurt up 1.5% and even the Parisian market, which has the most to worry about, gaining just under 1%.
There are those who will use this to support the belief that if the first trading day is up, then that bodes well for the year overall. They would be wrong.
Just take last year – on the first trading day of 2011 the FTSE, DAX and Dow all rose. By the end of the year, the FTSE was nursing a loss of 5.5%, the DAX was down a whopping 15%, and only the Dow managed a gain of around 6%.
Going further back won’t help much either. As Mark Hulbert points out, by and large the first market day of the year tells us nothing about how the year will play.
This focus on one day’s trading is a 'liberal' destruction of the old adage 'as goes January so goes the rest of the year.' That canard has proved to be right roughly 70-80% of the time. Unfortunately we have to wait several more weeks before we can drag it out of the cupboard – hence my indecent attention to the first trading day.
So – I hear you say – big deal, Quest. What point are you making? My point is that whatever the markets say, day by day we need to keep our eyes firmly on the economic and corporate fundamentals, for that is where the direction of travel will be gleaned.
Today was good because of better economic numbers in Germany, the U.S. and the UK. While one month’s data doth not a recovery make, it is a glimmer of hope that maybe the worst prognostications won’t come true. Or maybe I have fallen into my own trap – and seen one swallow and made a summer.
All I know is that I enter 2012 with losses across most of my investments from last year and wondering what on earth I did wrong (besides investing in the wrong things!!). It won’t be easy to make money in 2012 … but at least we have got off to a good start.
Oops, there I go again …
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