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A Scholar’s Metaphor for Equity Returns
In early February 2016, after the market began the year with its worst opening week ever and ended the month of January down -5%, we wrote that “this decline has zero predictive power as to the future returns in the stock market.” Fortunately for investors everywhere, this turned out to be correct, as the S&P 500 was up 12% during the year 2016 and 30.4% for the period 2016-2018.
Skip forward to this year, and after a brutal December 2018, in which the S&P 500 fell -9%, the market rebounded in January with a return of +8%. Does January 2019 have any more predictive power than January 2016? You know the answer as well as we do: of course not.