After a record-setting 2019, markets are off to a monster star in the New Year.
Should the rally continue for the next four sessions, we could be in for another great year, according to the “First Five Days” indicator, according to CNBC. In fact, when stocks finish the first five days higher, the S&P 500 has been positive “more than 80% of the time at year-end with an average gain of about 13%, according to the Stock Trader’s Almanac.”January also features the “January Barometer.” Typically, a great start in January could mean a higher year for markets. Remember, “So goes January, so goes the year.”
However, there are no certainties just because January starts off well.
With a busy year ahead, we could see a great deal of volatility thanks to the following:
No. 1 – Trade War Issues
Markets have priced in a lot of trade war progress over the last few weeks. Once the phase one deal is signed later in January 2020, we could see a sell the news reaction until we hear more about the phase two part of the trade war deals.
“I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15,” Trump tweeted. “The ceremony will take place at the White House. High level representatives of China will be present. At a later date I will be going to Beijing where talks will begin on Phase Two!”
No. 2 – 2020 Presidential Elections
Presidential elections always carry a great deal of risk and volatility.
In the 2004 election (Bush v. Kerry), the VIX jumped from 13 to 17 prior, as the Dow Jones fell from 10,400 to 9,700. In 2008 (Obama v. McCain), the VIX ran from 20 to 90, as the Dow Jones crashed. In 2012 (Obama v. Romney), the VIX jumped from 13 to 20.
Then, in 2016 (Trump v. Clinton), the VIX ran from 12 to more than 22.
No. 3 – Impeachment
While impeachment will remain a hot topic in the press, markets refuse to react to it. In fact, many are resolved to believing it’s a dead story that will go no further than the House of Representatives. Plus, until the House hands over the articles of impeachment to the Senate, there’s no impeachment.