During this past decade, January has gained notoriety in our shop for being a predictably difficult month in the stock market. We have come to expect extra volatility - which is partly caused by everything from portfolio rebalancing in managed accounts to institutional and independent investors selling for tax purposes. Regardless of the contributing reasons, we always take the following precautions in preparing ourselves for the added headwinds that January may bring:

 

- Re-evaluate our core positions and remind ourselves of our upside price targets.

- Avoid too heavy a concentration in any one stock or Industry Group.

- Abandon the use of margin going into the New Year. We use margin only when our portfolio is positive for the year - which is, of course, impossible when the year has just begun.

 

In essence, we typically “tone it down” as we enter January and we stay cautious until January 31st. Then we re-evaluate our strategy for the year.

 

Happy Holidays to you all and best returns in the New Year.

 

Scott O’Neil

President of MarketSmith