Market keeps eye on Jan.

January 02, 1992|By Chicago Tribune

CHICAGO -- Beginning today, the stock market will be tapping its barometer for a glimpse at the rest of the year. The fate of stock prices in January has been a remarkably accurate predictor of performance for the full year.

According to Yale Hirsch's "Stock Trader's Almanac," the Standard & Poor's 500 index has followed the direction it set in January for 36 out of the last 41 years through 1990.

Last year maintained the trend. A bullish January -- with the S&P 500 index up 14 percent -- foretold a strong, 26 percent gain for 1991. The January barometer is slightly less accurate in election years, however.

December's powerful rally in stocks -- the best December gain on record -- has many analysts expecting a post-holiday retrenchment, although a strong year-end rally generally carries over at least for the first two trading days of January.

Early January tends to be especially bullish for over-the-counter stocks favored by many individual investors, and many analysts see the rally in small stocks that began last year continuing into 1992, fueled by lower interest rates.

In general, most analysts believe the stock market looked past a great deal of bad economic news in December and soon will face a fresh load of disappointing earnings results.

A key issue for investors will be whether low interest rates sparked last month by the Federal Reserve will translate into significant moves by business to gear up production and hiring.

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