The Outperformers 2014

Bursting the bubble

A Fed generated bubble will take S&P to 2,250 before it crashes

As you may remember, the January Rule serves as a kind of barometer for the behaviour of the market in the coming year. Historically, when January was down, the rest of the year had over twice the declines than one would expect randomly, far more mediocre months, and a very sub average return. But it is far from perfect and it had the unusual problem this year of bumping into the positive signal from the Presidential third year, which started for us on October 1. For the statistically-minded, or the trivia-minded, the four previous such conflicts between the January Rule and the Presidential Cycle were inconclusive but the simple rule would have been to end the January Rule enterprise on September 30. This year was flattish by then and the new Presidential Cycle has gotten off to a good start since September 30.