Thursday, December 18, 2008

And a Little Stock Shall Lead Them II: January Effect in December

The January effect postulates that small stocks will outperform large caps; the strong version says for the month, the weak version says for the first week of the new year. Sometimes it works, sometimes it doesn't. This is just a heads up on the recent action of the Russell 2000 vs. the S&P 500. Part of the explanation is the recent weakness of the dollar which affects smaller companies less than it does the multinational behemoths in the S&P. Partly it is folks trying to frontrun the trade. For the day the DJIA was recently down a half percent, the S&P up .01% and the RUT up .27%. Chart via Yahoo Finance:
Chart for RUSSELL 2000 INDEX (^RUT)