Monthly Market Wrap: The January effect – will it manifest again in 2025?

Date: February 3, 2025

  • The Dow, S&P and Nasdaq all recorded gains in January
  • Thanks to a final-day push, the STI rose 1.8% to 3,855.82 in Jan
  • As expected, the US Federal Reserve kept rates steady
  • Trump’s tariffs spooked Wall St on Friday
  • China’s DeepSeek rocks global tech stocks
  • Data centre S-REITs hit by DeepSeek fallout
  • SLB Development and Japfa received privatisation offers
  • Not practical to use sovereign funds to support stock market: Gan Kim Yong
  • SingPost: No guarantee that asset sales will go through

 

The “January effect’’ explained

There’s an old saying in the stock market that says: “As goes January, so goes the year.” It implies that if the US market goes up (or down) in January, it will continue to rise (or fall) for the rest of the year.

The term was popularized by Yale Hirsch of the Stock Trader’s Almanac, who noticed the trend way back in the 1970s. Since then, it’s become a part of market folklore, cited by both casual investors and seasoned pros—though with varying levels of faith.

Since 1950, the January Barometer has been accurate about 75% of the time, meaning that in years when January was positive, the market ended up higher for the year.

In years when January was negative, the S&P 500 closed lower for the year about 60% of the time. While not as strong, it still suggests some predictive power.

Most recently in 2024, January was up 2.27%, and the S&P 500 closed the year up over 29%, far outpacing historical annual returns.

For this year, the Dow Jones Industrial Average gained 4.7% in January, its best January since 2019. The S&P 500 added 2.7% and the Nasdaq 1.6%.

For the week, the STI rose 51 points or 1.3%, the S&P 500 fell 1.0%, Nasdaq lost 1.6% and the Dow 0.3%.

Large push on final trading day ensured STI recorded 1.8% gain for January

As for the Straits Times Index, it started the year at 3,787, hit a month-high closing of 3,886 on 8 Jan before ending the month at 3,855.82, for a net gain of 68 points or 1.8%.

The bulk of this gain came in the final trading day of the month on Friday, when the banks, Singtel and Yangzijiang Shipbuilding (YZJ) all finished sharply higher. The STI on Friday rose almost 55 points that day in noticeably higher volume of 1.03b units worth S$1.81b.

The value of trades done in DBS, UOB, OCBC, Singtel and YZJ amounted to S$888.2m, or about half the entire market’s turnover on Friday.

US Fed held rates steady as expected, said inflation remains a problem

The US Federal Open Market Committee’s (FOMC) latest policy statement on Wednesday pointed to stubborn inflation readings and an economy hardly in need of rescuing as support for officials’ decision to pause their interest-rate cuts.

“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the statement read. “The unemployment rate has stabilized at a low level in recent months, and labour market conditions remain solid. Inflation remains somewhat elevated.”

The Fed’s policymaking committee voted to maintain their target for the federal-funds rate on Wednesday, at a range of 4.25%-4.5% as had been widely anticipated. The January pause follows a cumulative percentage point of rate cuts over the last three meetings of 2024.

Trump tariffs spooked Wall St on Friday

According to latest reports, Wall St stocks on Friday turned sharply lower after the White House press secretary Karoline Leavitt denied a Reuters report that suggested tariffs on Mexico and Canada could be pushed back to March 1.

“The president will be implementing (on 1 Feb) 25% tariffs on Mexico, 25% tariffs on Canada, and a 10% tariff on China for the illegal fentanyl that they have sourced and allowed to distribute into our country, which has killed tens of millions of Americans,” she said. As expected, all these tariffs were announced over the weekend.

China’s DeepSeek rocks global tech stocks

Last Monday US artificial intelligence (AI) leader Nvidia lost more market value than any company in history on a single day when it plummeted 17% to US118.42, shedding US$593b after news that a Chinese company had built an artificial-intelligence model that was competitive with Western rivals for a fraction of the cost provoked a panic in the chips sector.

Its previous big loss came on Sept. 3, 2024, when it lost nearly US$300 billion in value after offering disappointing guidance.

The selloff came as Silicon Valley raved about DeepSeek after the Chinese company said it spent just US$5.6 million training its AI assistant called R1, which appears to perform at a similar level to those developed by rivals such as OpenAI.

Even though that headline figure excludes research-and-development expenses, it is in striking contrast to the hundreds of millions U.S. companies have spent developing AI models of their own, a figure that is expected to increase to billions with the next generation of the technology.

Data centre S-REITs hit by DeepSeek fallout

Analysts warned that companies in the artificial intelligence (AI) ecosystem – including in Singapore – could be hit after the rise of Chinese AI firm DeepSeek caused a meltdown in US tech stocks.

Data centre-related real estate investment trusts (Reits) in Singapore already fell on Monday on the back of the saga surrounding DeepSeek.

Keppel DC REIT dropped about 8% to S$2.09 by Monday’s close, with 45 million units traded. Digicore REIT fell around 6% to US$0.545, with 8.7 million units changing hands, Mapletree Industrial Trust lost 2.7% to S$2.14, with 22.3 million units transacted, while CapitaLand Ascendas Reit declined 0.8% to S$2.56 with 13.3 million units traded.

“The announcement of DeepSeek advancement seems to have resulted in a recalibration of market outlook and earnings expectations across (the) entire AI ecosystem today,” RHB analyst Vijay Natarajan told The Business Times on Monday.

“This coupled with a recent sharp rally across the sector makes AI-related beneficiaries vulnerable for profit-taking and short-term corrections,” he said, adding that concerns are that AI capabilities could be achieved with affordable and accessible hardware solutions, thereby dampening the optimistic demand outlook for high-quality data centres.

DeepSeek shows it’s possible to use less powerful chips to create similarly powerful models,” said Morningstar in a Tuesday note. But it was still bullish on AI investments. “For semi equipment names in general, DeepSeek could be a perfect excuse for the US to launch even tighter controls over the supply chain.’’.

“While there will be elevated short-term volatility as demand may fluctuate with efficiency gains and wider adoption, we’re bullish over the long term as wider adoption should win out, and lead to sustainable AI investments,” said Morningstar equity analyst Phelix Lee.

SLB Development and Japfa receive privatisation offers

Two more companies, property developer SLB Development and agri-food business Japfa, may be delisting from the Singapore Exchange (SGX) after receiving privatisation offers from their major shareholders in January.

Construction company Lian Beng Group announced after the market closed on Jan 24 that it is offering S$0.23 in cash per share to privatise its subsidiary SLB Development at a premium over SLB’s closing price of S$0.17.

The offer price is also approximately 16.8% over SLB’s net asset value per share of S$0.197 as at Nov 30, 2024. SLB was listed on the Catalist board of the SGX on April 20, 2018 at S$0.23 per share. Lian Beng currently holds about 708.5 million shares in SLB, representing about 77.6% of the total number of issued shares.

Separately, agri-food company Japfa also announced after the market closed on Jan 24 that it has received an offer from the family members of its founder to take it private at S$0.62 per share. They own around 75 per cent of the shares.

Japfa, which runs chicken and pig farms in Indonesia and Vietnam, closed at S$0.53 on Jan 24. Japfa was listed in 2014 at S$0.80 per share.

Not practical to use sovereign funds to support stock market: Gan Kim Yong

Minister for Trade and Industry Gan Kim Yong said at the Singapore Exchange’s (SGX’s) 25th anniversary ceremony in early January that while there have been suggestions to channel sovereign monies into the local equities market, it is not practical to rely on sovereign monies alone to sustain these funds and to provide support.

Gan, who is also deputy prime minister, instead called for the crowding in commercial capital on a sustained basis – such as institutional wealth, individual investors and family offices – as a key measure to stimulate market interest and maintain trading liquidity.

He also highlighted the importance of broadening liquidity, particularly for smaller counters with market caps between S$500 million and S$3 billion.

SingPost: No guarantee that asset sales will go through

SingPost said whilst it has been in discussions with various parties for the sale of its assets, there is no certainty that any transaction will arise.

“In particular, no definitive or binding agreement in relation to the sale of Famous Holdings has been entered into at this time,” said SingPost, which was clarifying a Maybank Securities report that said that the national postal service provider could offer a potentially “significant” special dividend after it completes a possible sale of two business units.

The research house was referring to SingPost’s proposed divestment of its Australian logistics business Freight Management Holdings and its potential sale of freight forwarding business Famous Holdings.

Investing with Insight: Watch this Week’s Technical Outlook


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