“The Worst Start To A Year Ever!”

Think back to January. We had the worst start to a year for US stocks ever. EVER! For as far back as we have data.

Michael Batnick put together the below chart to illustrate how bad it was for our client-only conference call last night at Ritholtz Wealth Management:

screen-shot-2016-12-15-at-10-09-45-am

Lots of people were using this little tidbit to scare you. They built it up into this thing where “As goes January, so goes the rest of 2016.” They told you to liquidate your 401(k)! They told you it was just the beginning.

Nothing’s more detrimental than the recency bias – and at that time, the recent situation for stocks was a bitch.

But, as it turns out, the way a stock market year starts out contains no useful information in terms of where a year will end. None. Zero. I want to show you something…

Here’s what happened with the S&P 500, after the worst start to a year in history – positive 10.8% not including dividends:

pasted-image-at-2016_12_15-10_14-am-2

This next one is wild af. The Russell 2000 small cap index was down 17% in the first four weeks of the year! It was down almost 30% from its all-time high! Lots of talk about how “small caps are the canary in the coal mine.” Oops! The Russell 2000, after the worst start ever, is now up 20.5% for 2016 – also not including dividends!

pasted-image-at-2016_12_15-10_14-am-1

Here is the Dow Transportation Average – another coal mine canary according to the old wives tales. The transports started January down 10%. They are now up an astounding 26% on the year. So much for that:

pasted-image-at-2016_12_15-10_14-am

Finally, the other boogey man they like to frighten people with – the emerging markets stocks. EM began the first 28 days of the year down a menacing 14.2%. They are poised to finish the year up 10.5%:

pasted-image-at-2016_12_15-10_15-am

It’s important to note that this happened in the absence of quantitative easing by the Fed and with the pace of US stock buybacks down substantially from the prior year. This also happened in the context of an “earnings recession” and with all of the uncertainty of the most rancorous election of our lifetime, slowing Chinese economic data, Brexit, a spike in European nationalism and all of the other horrible sh*t you could toss into the cauldron.

My message is not that we will always get a happy ending. Rather, it’s that the market will frequently twist and turn throughout the course of a year and do some very unexpected things, regardless of how the experts believe the headlines or risks “should be” interpreted by investors. This is because markets quickly price in current events and then move on to the next thing – this process happens at a pace that far exceeds our own abilities to make sense of the world.

2016 is another year in which the meteor somehow just missed the earth. Maybe in future years we won’t be so lucky. That’s why the game is so hard. Too hard to be played for 99% of us with any hope of ever winning.

“Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.”
– Warren Buffett, 1993 Berkshire Hathaway Shareholder Letter

***

If you’ve had enough of the noise, we can help you. Visit Ritholtz Wealth Management and get started on a new path for 2017 and beyond. 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. w88 commented on Sep 20

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  2. facebook old version commented on Sep 26

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  3. Kimber Firearms for Sale commented on Oct 14

    … [Trackback]

    […] Here you will find 25598 additional Information on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  4. td easy web commented on Oct 15

    … [Trackback]

    […] Find More Information here on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  5. dumps pin commented on Oct 31

    … [Trackback]

    […] Here you can find 87726 additional Info on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  6. 안전공원 commented on Nov 01

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  7. replica rolex submariner commented on Nov 26

    … [Trackback]

    […] Find More Information here on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  8. tangerine bank signin commented on Nov 26

    … [Trackback]

    […] Find More on on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  9. 토토사이트 commented on Dec 16

    … [Trackback]

    […] Read More on on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  10. diamond painting commented on Dec 17

    … [Trackback]

    […] Information to that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  11. diamond art kits commented on Dec 29

    … [Trackback]

    […] Here you can find 16411 additional Info on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]

  12. CI CD commented on Jan 11

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2016/12/15/the-worst-start-to-a-year-ever/ […]