Ready, Set... January

Over the last 24 years, January has commonly had massive inflows of money to the stock markets through mutual funds and ETFs. On average, it saw more inflows than any other month of the year excluding November. The 'Sell in May and Go Away' approach is supported by the chart posted by Themarketear.com. In the second half of an average year, returning to investing in September seems sensible. Outflows bottom in August, providing a good entry point for capturing increasing investment activity in November – another month of massive inflows.

Why does January see fund inflows?
We identify two major contributing factors:

Bonuses are paid and reinvested (Wall Street recently started talking about 8 digit annual compensations)
Fund managers are setting up their positions for the new year

Where will the money flow in 2022?

We expect the following two sectors to benefit:

Travel and Leisure. Omicron, though dangerous and fast spreading, is beginning to be compared to a bad flu by the public. Booster shots and anti-Covid pills will bring another wave of revenge travel and business class domestic and international trips. There seems to be an upside in sectors suppressed by Omicron, such as airlines, cruises, hotels, casinos etc.
Energy. A recovery from the pandemic driven economic hibernation will result in a further recovery of the demand for a limited supply of oil and gas, caused by years of underinvestment in the development capex. Oil and gas service companies and upstream producers are likely to get on the radar of investors and continue their strong performance.

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