The author is a strategist of NH Investment & Securities. He can be reached at [email protected] — Ed.
The January Effect is a hypothesis that there is a seasonal anomaly in the financial markets where securities’ prices increase in the month of January more than in any other month. In 2023, a January Effect based on vague hopes for a rally alone is unlikely. However, a January Effect backed by greater interest in a variety of themes, sector rotation-driven rallies, strategies seeking short-term returns, and policy momentum related to the Yoon administration’s second year in office, is likely.
The stock market is forecast to remain range-bound, repeating ups and downs amid a wide divergence between market expectations for a Fed pivot and the Fed’s stubborn stance. Arguments are to continue regarding whether the stock market already reflects an expected economic downturn. Relief and anxiety also persist regarding the credit market.
China is forecast to repeatedly strengthen and ease its Covid-19 restrictions while reopening its economy. And, it should take some time before the downward revision cycle of corporate profit forecasts comes to an end. While the stock market appears to have dropped to the lowest levels of this cycle in 2022, we believe that it is still premature to actively load up on stocks.
Meanwhile, a variety of noteworthy points are emerging, including Korea’s New Growth 4.0 Strategy, CES 2023, the JP Morgan Healthcare Conference, and the IRA. In addition, interest should pick up in companies that are able to achieve top-line growth, reduce COGS-to-sales ratio, or expand R&D and capex, at a time when it is difficult to raise funds.
