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‘As January goes, so goes the year’: 80% chance stock market adage will work

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The FTSE 100 has made a positive start to 2020, which should mean this year will be a good one for the index.

That’s if the old stock market adage ‘as January goes, so goes the year’ rings true.

According to Fidelity International, the performance of the index at the start of the year can often set the tone for the rest of the year.

Its analysis found that, since its inception in 1984, the UK’s benchmark index has risen in the first month of the year in 20 out of 36 years and in all but four of these occasions, it has gone on to record a further gain between February and December.

Fidelity said this suggests the so-called January Effect has an eight in 10 chance of working after a good start to the year.

On the first trading day of this month, the FTSE 100 rose 62 points to 7604.3 and investors will be hoping this continues throughout the month.

Tom Stevenson, investment director for personal investing at Fidelity International, said: “Our analysis of the data offers some evidence that the January Effect has a good chance of working, especially if the year starts out on the front foot. But it’s important to treat this with some caution. Stock markets tend to rise over time, so it is reasonable to expect shares to go up more often than not, both in January and in the rest of the year.”

He added: “Focusing on sound investment principles such as staying invested through the cycle, saving regularly and being well-diversified across asset classes and geographies is a much better way to secure the best long-term returns possible.”

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