Markets to enter "wait and see'' mode
Add BT as a preferred sourceSATURDAY'S column touched on the "January effect", which is a fairly regular financial market phenomenon where prices rise at the start of a new year after falling at the end of the previous year.
One theory to explain this oddity is that investors sell out of losing, non-performing positions to realise tax losses at the end of a calendar year, then buy back those same positions immediately afterwards, perhaps not wanting to abandon their original assessment or admit that they were wrong.
Of course, if markets are reasonably efficient, then it should be impossible for anyone to extract abnormal returns if they tried to exploit this phenomenon - enough buyers would emerge at the end of the year and sellers at the start of the new year to wipe out any hoped-for advantage.
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