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January as Market Barometer, So Get Used to It

NEW YORK (The Street) --- "So goes the first week of January, so goes the month, and so goes the year."

Investors will be hoping the old adage does not hold true for 2014, with the S&P 500 (^GSPC) down around 1% from its closing levels last year.

There are reasons for optimism. Traders note that delayed tax-related selling may have pressured stocks early in the new year after 26% gains for the index in 2013. They also point to uncertainty around the Federal Reserve's tapering plans and fiscal concerns as feeding caution in the first half, with expectations for a stronger second half.

In 2008, a bad January was certainly a bellwether. The index fell 4% in the first week of that year, leading to losses of 38.5% for the S&P 500. Yet statistically, the adage is hit-and-miss: over the past 23 first weeks of a year, calendar year declines have followed just 48% of the time.

Most fund managers expect single digit gains for U.S. markets this year as the global economy continues its recovery.

Healthcare, technology and industrials are the most favored sectors while bond-like stocks such as telcos and utilities are expected to suffer against a rising rate backdrop. Pundits remain cautious on emerging markets, but favor select economies in Europe and the Japanese sharemarket with its ongoing stimulus support.

-- By Jane Searle in New York 

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