January seasonal scorecard: Another clean sweep
How did the January seasonal patterns perform?
January was a month that featured a black swan with the coronavirus outbreak but it also followed the usual seasonal patterns almost perfectly.
In our seasonal preview at the start of January, I outlined six seasonal trade ideas and all six hit the mark. It was the second month in a row where the seasonals ran the table.
1) Looks for weakness in the S&P 500
I highlighted that the average decline in the S&P 500 is 0.49% in January but noted that stocks tend to rise in the first few days of the year before rolling over. The index fell 0.2% in the month but gains peaked on Jan 22, a bit later than expected. Still, the pattern held up.
2) January is the second-weakest month for AUD and CAD
This one paid off with CAD falling 2% and AUD nearly 5% in the month, and trailing all major FX.
3) The gold bull run continues
I've written about this effect for many years and wrote that "the January effect for gold is probably the best and most consistent seasonal trade I know of." Once again it paid off as gold gained 4.7% in the month.
4) The second-weakest month for USD/JPY
This pair finished lower on the month but it was a tough trade. It fell hardest in the first few days of the month before reversing as US-Iran tensions faded. Then the selloff resumed late in the month.
5) Natural gas weakness
The best time to sell natural gas is 'whenever the market is open'. The second-best time is at the start of January and mild weather in the US made this an especially-profitable trade as NG fell a whopping 16.5%. It's another 13% to the 2016 low.
6) Oil weakness in play
This was such a trade early in the month as crude jumped to $65 but it cratered from there down to just above $50. The net was a 15% decline.
Overall, that's a clear sweep. I'll have the February data up later today.