Through the ages we've actually had quite a few alternatives, from 24 December to, say, 31 August. If we had still been using the Julian calendar, we would have had to put off celebrating New Year's Eve by a full 13 days. (Some people still do, in orthodox countries like Russia and Serbia.)
A similiar point applies to measuring financial returns. Official records now show that the Oslo Børs benchmark index lost 1.8 per cent in 2018. If, every year, we had stopped counting one month later, last year's return would have been boosted by almost five percentage points. In Stockholm, the OMX 30 would go from losing some 10.7 per cent to stopping the bleeding at 4.9 per cent.
On the other hand, a similarly tilted 2017 would have detracted from the annual return counts in both Oslo and Stockholm, albeit by a lesser amount.
“After a truly lousy end to 2018, markets came back with a vengeance.”
In some years, it really makes a difference. In 2016, the MSCI World Index delivered a return of 9.0 per cent in local currency. If the year had ended in January, the annual return would have been 16.7 per cent. If, instead, it had ended in November, the figure would have shrunk to a puny 3.8 per cent.
See? Somehow, we attach special importance to the 12 months that end exactly on 31 December. Inevitably, this molds our perception of events in ways that may distort our view. Over time, of course, the choice of intermittent closing dates makes absolutely no difference.
The reason I bring this up, if you haven't already guessed it, is the wonderful rebound we experienced in January. After a truly lousy end to 2018, markets came back with a vengeance. In local currency, the obviously well diversified MSCI World Index rose by more than 7.2 per cent, a return surpassed only twice since 2009. Spreads on US high-yield bonds, no less subject to closing date effects, declined by almost one percentage point.
A time for rejoicing, then? A new, improved New Year's Eve? Well, not really. Just a time for remembering that no single figure holds the final truth – even if that figure finds its way into your tax filings.
