The saying “As January goes, so goes the year,” refers to what is called “The First Five Day Barometer.” This is the idea that January stock performance tends to predict the rest of the year’s stock performance. According to the First Five Day Barometer, if equalities post high in the first five days of the year, then there is a very good chance that the stock market will continue to rise for the rest of the year.
The January Barometer isn’t just a myth. There is statistical data to back this claim up. The Stock Trader’s Almanac has found the January Barometer to be correct approximately 84 percent of the time since 1950. This is more than just a coincidence. It also bodes very well for the rest of 2018.
So far, the stock market is off to an amazing start. As of Monday, January 8th, the fifth trading day of the year, NASDAQ and S&P both rose to record closes for the fifth straight trading day in a row. The Dow gained more than 2.3% in the first sessions of 2018 and the S&P was up nearly 3%. NASDAQ closed at 3.7% on the final trading day.
Stocks are currently at an all-time high. In fact, they have risen all through President Trump’s first year in office. Last year was amazing, as well, as far as stocks were concerned. The Dow rose 25% while S&P 500 surged about 20%. NASDAQ rose to 30%. Although it might be hard to beat those numbers in 2018, the current start to the market looks very promising indeed.
There are high hopes for strong earnings all across the board. The healthy economy has helped keep consumer demand very strong. Many companies are promising to give workers pay raises with the savings that they will realize from tax cuts. Even some electric companies have vowed to give consumers price cuts. Other companies plan to boost dividends as a way of rewarding shareholders.
The rest of the economy looks great for 2018 as well. Goldman Sachs is forecasting a United States GDP growth rate of 2.5%. This is higher than last year’s rate, which was 2.2%. In 2016, the GDP grew at just 1.6%.
The unemployment rate has been at a record low, as well. In November 2017, the rate of unemployment was just over 4% — the lowest that it has been in 17 years. Job gains have been strong, and U.S. employers are actively looking to fill millions of job openings, especially in the technology field.
Additionally, for the first time in years, the housing market is strong. Sales of existing homes are up. Builders are struggling to keep up with the demand for new construction. House prices have risen more than 6% since last year according to the S&P Case-Shiller measure. Housing prices are above the previous year’s peak. Also, only 5% of homeowners owe more than the value of their homes. This is a sharp contrast to just a couple of years ago when many homeowners were underwater on their loans — owing more than the value of their homes.
Not only is the United States economy improving, but global economies are really looking up too. The economies of the United States’ major trading partners are on an upward swing. The global economy is doing the best that it has done in more than seven years. All of the major economies around the world are at a peak level. The larger companies that comprise the world economies are currently on an upswing too. This is the first simultaneous recovery in a long time.
So, what is responsible for the boom in the U.S economy? Part of the momentum has come from the pro-growth policies of the Trump administration. These policies are causing major U.S. stock indexes to reach record levels. Also, tax reform will be one of the crucial elements responsible for the record economic growth levels.
The United States seems to be heading towards another record-setting year as far as the stock market and the U.S. economy as a whole goes. If so, then this upward swing in the economy will be one of the country’s longest periods of economic recovery in history.
Regards,
Ethan Warrick
Editor
Wealth Authority
