Followers of the January Effect believe that so goes January, so goes the year for stocks. Add to that, it is widely believed that small-cap stocks are supposed to do the leading in the first month of the year to validate the January Effect.
There is some bad news on that front. The iShares Russell 2000 Index (ETF) (NYSE: IWM), the largest small-cap ETF, is down 8.4 percent over the past month and has closed lower in three of January's four trading sessions. However, there is some good news. That being: As a given year moves along, small-cap stocks lose their predictive power.
Seasonality And Historical Performance
“Twenty years of market returns suggest that the predictive nature of small cap performance lessens as we get further into the year. In ...
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