You are here: Home - Investing - Experienced Investor - News -

Record start for FTSE 100 could set tone for rest of the year

Written by:
The new record high reached by the FTSE 100 this morning could set a positive tone for markets for the rest of the year.

The UK’s blue chip index hit 7,205 in early trading, which could signal good news for investors thanks to a phenomenon called the ‘January effect’.

The ‘January effect’ describes the tendency for positive markets in the first month of the calendar year to lead to positive markets in the subsequent 11 months.

Analysis from Fidelity International shows that since the inception of the FTSE 100 in 1984 the index has risen in the first month of the year in 19 out of 32 years.

In all but four of these, the UK benchmark has gone on to record a further gain between February and December. That’s a 79% success rate.

Tom Stevenson, investment director for personal investing at Fidelity International, said: “There is an old adage that states ‘as goes January, so goes the year’. While the ‘January effect’ may not have come off last year, it is hard to argue against the statistics which show that a positive January has led to further rises four out of five times during the past 32 years.

“The FTSE 100 has already risen to a record high this morning, breaking through the 7,200 mark barrier for the first time.”

However, Stevenson said there will be a two way pull for the FTSE 100 this year.

“The growth outlook is positive on both sides of the Atlantic and bond yields should continue to rise modestly. That will make equities more interesting than bonds and valuations are not excessive. Offsetting that, 2017 will be a year of significant political uncertainty in Europe, including the UK. The post-2009 bull market is long in the tooth but I expect it to continue this year.”

He also points out that despite having a reasonably reliable hit rate, the ‘January effect’ and other such adages should not be relied upon when making investment decisions.

“Investors should focus on sound investment principles such as staying invested through the cycle, saving regularly and being well diversified across asset classes and geographies,” he said.

He also pointed out that in the 14 years the FTSE 100 had a negative January, the market reversed the trend on nine occasions, going on to end the year at a higher level.


(Green signifies when the ‘January effect’ has worked and red when it has not worked.)


(Red signifies when the market has continued to fall and green when, despite a negative January, the market has risen over the year.)

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

Coronavirus and your finances: what help can you get in the second lockdown?

News and updates on everything to do with coronavirus and your personal finances.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
How much of your income goes on travelling to work?

UK workers on average salaries can spend as much as 14% of their income travelling to work, much more than...