“Challenging Year” Ahead For Wall Street Investors — CFRA

One month into 2022 and Wall Street losses mount. Worse still, the remaining 11 months of the year likely won’t be pretty for Wall Street investors.

Through Friday the SPDR S&P 500
SPY
exchange-traded fund, which tracks the S&P 500 index, was down 3.6%, while the Nasdaq index had lost 6.9% over the same period, according to data from Yahoo! Finance.

Unless sentiment stages a radical change, then it looks like a near-certainty that January will end the month down, and that’s a bad sign for the rest of the year, experts say.

Sam Stovall, chief investment strategist at New York-based research company CFRA put the matter as follows in a recent report:

• “Barring a blistering bounce to end the month, the January Barometer, which states ‘As goes January, so goes the year,’ will be negative, implying (but not guaranteeing) that investors are in for a challenging year.”

He cites the January-effect as well as two other key metrics the so-called Santa Claus rally, and the “first five days of January” indicator. All three look at the performance of the S&P 500 over different periods as a clue to how the year ahead will play out in the market.

He says the Santa Claus rally — which covers the year’s final five trading days plus the first two of the new year — materialized a gain, which is generally seen as a good omen. However, the self-explanatory first five days of January indicator fizzled as did the January effect.

That’s a bad combo for anyone who owns stocks, Stovall explains as follows:

• “Since 1945, in the eight times that this combination occurred, the S&P 500 was lower for the full year by 9.6%, enduring declines in all years but one (2014).”

 He also warns investors no to get tricked by any near-term rally.

“The equity markets may reward investors with a short-term relief rally,” Stovall writes. “Unfortunately, this advance won’t likely be the end of the decline altogether.”

In other words, it’s likely to be a bad year.