Daily Brief - The January equity surge

It ended much like it started - with a bang. Thankfully, the bang to close out January was up, not down. Tech stocks lead Monday’s charge, with the Nasdaq Composite 3.4%. Even so, the tech-heavy index is still down about 9% on the month.

As goes January …

Is January a good predictor of market performance for the rest of the year? Maybe, but not the way you may expect.

There have been 6 other occasions in the past 20 years when S&P 500 has fallen 3% or more in January. Three of the 6 declines were greater than 5%.

Of the 6 “horrible” starts, 5 saw the market claw back its gains during the year. In fact, on 3 of those occasions equities were back in the positive territory by the end of February. Only in 1 episode, 2008, did the market never turn positive again for the year.

So what?

TOGGLE’s Leading index of aggregated insights across our platforms has been spot on (updated in every Friday edition of the Daily Brief) anticipating the turn and the subsequent surge higher.

But where to from here?

Investors were not slacking. The chart below shows current investor positioning in S&P futures: it’s back to the highs! This suggests volatility is likely to remain high as everyone jockeys for a balance between taking their trading profits - from buying the dip - and genuine conviction that the market is headed higher.

If you’re looking for slightly more off-the-beaten path equity stories, try this: last week, Mattel finally regained its right to produce Disney princesses — and the company’s shares spiked as much as 11% on the announcement.

This means Cinderella, Elsa and their friends are moving back in with Barbie after a 6-year hiatus when Mattel lost the rights to its rival Hasbro. During the “it’s complicated” status stage, Barbie was no slouch. After a complete makeover, sales jumped 87% in the first quarter. This feat won Mattel back the lucrative Disney contract, and the dolls were reunited.