What do you think the January Effect is going to be on 2010?

January is so special for so many good reasons. Apart from the obvious psychological high that anything fresh gives, January is the time when the financial and economic sectors experience changes. One of these is the rise in the prices of securities. In fact, in December, every year, people rush to buy securities in anticipation of price hikes in January and then sell them in January at a profit. If you are not already doing this, try this from this year. You can make a few extra bucks. That way you start your year well and like so many others you might be happy with the psychological boost that a well started year gives! January is the time when investors focus more on stock markets with a hope that the year ahead is going to be a great one for the stock markets, especially when the market promises to be recovering. All this is known as the January Effect.

The January Effect is no arbitrary phenomenon. It’s been happening for some years now and you might be interested in knowing how it happened, when and why. But before that let’s see the expected impact of January Effect in 2010. The opinions oscillate with great amplitude. The skeptics believe that the January effect will not be all that significant this year, the reason being that whatever taxable losses had to occur they had already happened in the previous year and this year did not come specifically with any losses. Some feel that the January effect like so many other phenomena is following the natural process of evolution. The effect will either be a different one or totally null. Only people who had invested in stocks last year were the ones who took the losses. The long term investors were the ones who were affected by this. They are the ones who saw some benefits with their stocks in March last year, and did not want to sell off their stocks for  losses  smaller in comparison those of 2008.Some others are sanguine about the January effect this year.  They feel it’s actually going to help them. According to Globe Investor, the January effect is very much there and there are going to be 5 stocks that are really going to benefit from the January effect. As I said, the January effect is more psychological in nature. If there is a good influence on the stocks in January it will be considered a part of the January effect….even though it necessarily does not have any good effect the rest of the year.

The January Effect seems to be true in the case of two consecutive years for now, i.e. 2008 and 2009.  This was observed even years before in the early 19th centuries too and has been ruling the market psyche from then. The weak January of both these years showed a bad year. The morning shows the day and January shows the year!