Well, January is in the books and after a boomer 2013, January 2014 was a dud. The S&P 500 dropped 3% and the Dow Jones Industrial Average dropped almost 5%.
According to the Stock Trader’s Almanac, over the last 110 years, when January is a down month, the year is a down year roughly 90% of the time. The exceptions are often years with big news of some kind that significantly moved the market higher.
So, while risk is a big factor in my fund selection, it is an even a bigger input this year. The economy seems to be recovering more strongly, the last couple days of data notwithstanding, but the Fed is withdrawing its stimulus and that is hurting emerging market currencies at the same time China tries to deal with reining its tremendous increase in debt from the post-2008 stimulus it ordered.
My advice is to be cautious on stocks this year and refrain from chasing recently hot stocks.