A lot of people would like to be able to predict the yearly performance of the stock markets in order to make money. It’s been deemed by most to be a relatively impossible feat. If you could, it would be like having a license to print your own money from the stock market. Oddly enough, academics Michael Cooper, John McConnell and Alexai Ovtchinnikov have developed a system for it.

In their paper entitled ‘The Other January Effect’, they provide a detailed analysis of the U.S. Stock Market from 1940 to 2006, the aim of which to determine if their was a significant correlation between the performance of the stock market in January compared to the remainder of the year. The results were astounding.

According to statistical evidence, the performance of the S&P 500 in January compared to the rest of the year boasts a direct correlation with an impressive 88 percent strike rate. That’s right. 88 percent of the time when the stock markets go up in January, they continue to advance for the remainder of the year. Likewise, in years where January takes a bearish turn, the rest of the year tends to be very bearish as well.

Personally, this theory gets me very excited as I’m currently holding onto a bullish portfolio as of January 2010 in writing this article. The markets seem to be making a breakout, which, if Michael Cooper’s theory holds sound which it has so many years in the past, this could be a great year for recovery.

The only years in which this particular January effect haven’t held true in the stock market have been years in which a significant event took place to dramatically shift the course of the overall economy, such as the 9/11 attacks in 2001 that ended up being the harbinger of a significant recession. I would play this card only if such an event never managed to take place.