What history tells us about share prices in January 2023

Forget 2022, we look at the history books to see what could be in store for investors at the start of the new year.

What a year! What a month! We’ve already written at length about how poor this year has been for growth stocks and most stock markets; how the FTSE 100 has outperformed the rest; and the impact that economic influences such as interest rates, inflation and the cost-of-living crisis have on investor sentiment. But we had more surprises in December – events that would have seemed so unlikely 12 months ago.

Yes, growth and tech are out of favour, but the American Nasdaq index is down 11% this month, the S&P 500 has lost over 7% and the Japanese Nikkei 5.8%. Hong Kong is December’s top market, up 7%.

Tesla Inc (NASDAQ:TSLA) shares have crashed 40% in the past month, extending losses in 2022 to around 70%. Ford Motor Co (NYSE:F) has reversed 20% the past month, Airbnb (NASDAQ:ABNB) has fallen 18%, NVIDIA Corp (NASDAQ:NVDA) 17%, Amazon.com Inc (NASDAQ:AMZN) and Intel Corp (NASDAQ:INTC) 14%, and Apple Inc (NASDAQ:AAPL) 12%.

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Now December is historically a great month to own shares. I said so a month ago when preparations for Christmas were beginning to quicken and the FTSE 100 had spent the previous seven weeks rallying over 750 points, or 11% to 7,599. Turns out that was pretty much the peak for the month.

As I write, after the markets closed on 28 December, both the FTSE 100 and FTSE All-Share index are down 1% for the month. To generate a positive return in December, the FTSE 100 must end the month above 7,573.05 and the All-Share above 4,139.65. It’s a long shot and the odds are against it given time is running out, but the indices have fallen only six times since 1986, so you never know.

Will you be celebrating in January 2023?

Those of a certain vintage will remember a time when January was a great month to buy and own stocks. But times have changed, and January’s reputation has suffered a serious dent in the 21st century.

Since 2000, the average return for January is negative and the FTSE All-Share has fallen in 16 of the past 23 January’s. The FTSE All-Share index has fallen in seven of the past nine January’s and posted losses in the past three years.

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There is little in the diary that suggests January 2023 will be any better. The global economy looks to be heading for a recession, rapidly increasing interest rates are slow to tame inflation, and consumers will likely tighten their belts further over the next 12 months as costs hit household incomes.

A resolution to the conflict in Ukraine would be welcome news and a boost to sentiment worldwide; so would a successful emergence from Covid restrictions in China. But key to a good start to 2023 would be any sign that inflation is under control, forcing central bank policymakers to slow further the pace of interest rate increases and eventually a long pause.