To The Moon

In my opinions, the “January Effect” is a seasonal increase in stock prices that occurs in the month of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital gains, prompt a sell-off. Another possible explanation is that investors use year-end cash bonuses to purchase investments the following month. However, it is important to note that the January Effect is a perceived seasonal tendency and not a scientifically accurate measurement.

The January Effect is theorized to occur when investors sell losers in December for tax-loss harvesting, only to re-buy new positions in January. The effect seems to affect small caps more than mid-caps or large caps because they are less liquid. Since the beginning of the 20th century, the data suggests that these asset classes have outperformed the overall market in January, especially toward the middle of the month. Investment banker Sidney Wachtel first noticed this effect in 1942.

However, it is important to note that the January Effect seems to have largely disappeared as its presence became widely known. Indeed, our own look back at the SPDR S&P 500 ETF (SPY) since its 1993 inception makes one wonder how the term ever came to be used. Of the 30 years since 1993, there have been 17 winning January months (57%) and 13 losing January months (43%), making the odds of a gain only slightly higher than the flip of a coin. Further, since the start of the 2009 market rally through January 2023, January months showed seven winners vs. seven losers, again a 50%-50% split. Given the strong rally from 2009, one might rightly expect a more pronounced number of January winners, but this is not the case.

Traders should be aware of the tenuous nature of the January Effect and instead focus on the market conditions at the time and what they suggest for the overall short-term direction of the SPDR S&P 500 ETF.

My portfolio is doing quite well for the first week, since Kraft Heinz stock price seems doing pretty well recently.

$The Kraft Heinz Company(KHC)$ 

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