3 Min Read (February 2023 Edition) | How reliable is the “January Effect”?

The "January Effect" has been a well-known hypothesis in the investment world. The idea behind is straight forward, statistically speaking, the full year stock market performance is more likely to end on a rise when we see a positive return in January, and vice versa. Some says this is because traditionally, January is the time when fund manager reset their investment strategy for the year, hence to a certain extent, the money flow of January does have its reference value.As for 2023, January has gone by in a blink, and we’ve seen a strong performance from both the global stock market and the Hong Kong stock market, which have risen 7% and 9% respectively.Having said that, the January effect is only one of the many reference data. Investors should always have a forward-looking view to the market. Back by top fund houses, GoWealth Digital Wealth Advisory can offer you a holistic market analysis. We have summarized 3 main factors these top fund houses are looking at for you below:
  • Inflation Expectations
PIMCO: Even with the range of scenarios, uncertainty over the outlook for the Fed should be much lower in 2023. This led us to focus on the concentric circles investment framework. If the Fed and other central banks can convince investors that the center will hold, then assets at the center should perform well. And – sequentially – this should feed into improved returns at the higher risk asset. But in the event there is a loss of confidence on inflation, and central banks are forced to raise rates more than expected, this will have negative consequences for the higher risk assets.
  • Signal for Recession
Blackrock: Central banks are deliberately causing recession by overtightening policy to tame inflation, in our view. That makes recession foretold. What matters: our view on the pricing of economic damage and our assessment of market risk sentiment. Investment implication: We stay underweight DM equities but expect to turn more positive at some point in 2023.
  • Covid Development in China
Invesco: China's equity market delivered positive return this month with the long-anticipated announcement of China’s full reopening of borders. We expect a surge in people mobility after the long-awaited reopening, where there will be a pent-up demand for travel and domestic demand. In Hong Kong, with close proximity and intimate economic relationships with China, it is expected to be one of the largest beneficiaries of China’s reopening, where we expect more trades across border and influx of visitors from mainland China to Hong Kong.How can GoWealth help you?Want to invest intelligently? Make sure you don’t only monitor January’s market performance. Backed by WeLab Bank’s fintech experience and AllianzGI’s investment management expertise, “GoWealth Digital Wealth Advisory Services”, provides projection of the market trends in the next 50 years1, to help you make well-informed and strategized investment decisions.Click Here for Full Article
PIMCO: https://www.pimco.com.hk/zh-hk/insights/blog/cyclical-outlook-key-takeaways-strained-markets-strong-bonds
Blackrock: https://www.blackrock.com/hk/en/insights/global-investment-outlook?switchLocale=Y
Invesco: https://www.invesco.com/hk/en/investment-ideas/gms/market-insight-global-monthly-outlook-january-2023.html
Note: This document is for information only and does not constitute any investment advice. Past returns are not indicative of future performance. The above information is for illustrative purposes only. Investment involves risks, please refer to the Important Notice herein for details. GoWealth Digital Advisory Services and fund investment are not deposit and not protected by Deposit Protection Scheme.1The algorithm in the GoWealth Digital Wealth Advisory Services relies on the portfolio simulation database containing 12,000 simulation paths for the model portfolios projected over the next 50 years (i.e. 600 months), which reflects our capital market forecast on various asset classes and the model portfolios in terms of risk, return and correlations. Such information and simulations are assumptions only. They do not reflect or project actual investment performance of the model portfolio or performance of any constituent funds therein. The recommendation is not a guarantee that you will achieve your goal.Importance Notice
This document is for general information only. The information or opinion herein is not to be construed as professional investment advice or any offer, solicitation, recommendation, comment or any guarantee to the purchase or sale of any investment products or services. This document is for general evaluation only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person or class of persons and it has not been prepared for any particular person or class of persons.
The information or opinion presented has been taken from sources (including but not limited to information providers and fund houses) believed to be reliable by WeLab Bank, but WeLab Bank makes no warranties or representation as to the accuracy, correctness, reliabilities or otherwise with respect to such information or opinion, and assume no responsibility for any omissions or errors in the content of this document. WeLab Bank does not take responsibility for nor does WeLab Bank endorse the information or opinion provided by any information provider or fund house.Past performance is not indicative of future results. WeLab Bank makes no representation or warranty regarding future performance. Any forecast contained herein as to likely future movements in interest rates, foreign exchange rates or market prices or likely future events or occurrences constitutes an opinion only and is not indicative of actual future movements in interest rates, foreign exchange rates or market prices or actual future events or occurrences (as the case may be).You should not make any investment decision purely based on this document. Before making any investment decisions, you should consider your own financial situation, investment objectives and experiences, risk acceptance and ability to understand the nature and risks of the relevant product(s). WeLab Bank accepts no liability for any direct, special, indirect, consequential, incidental damages or other loss or damages of any kind arising from any use of or reliance on the information or opinion herein. You should seek advice from independent financial adviser if needed.WeLab Bank is an authorised institution under Part IV of the Banking Ordinance and a registered institution under the Securities and Futures Ordinance (CE Number: BOJ558) to conduct Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.This document is issued by WeLab Bank. The contents of this document have not been reviewed by the Securities and Futures Commission in Hong Kong.