The January Barometer

Hi friends, the S&P 500 just had a great start to 2025 with a gain of 2.7% in January. Consequently, I wanted to talk with you about the January Barometer. This interesting market indicator says that stock returns will finish the year positive when returns were positive in January. We studied this for you to see just how accurate this has been in the past and what this may tell us about the future.

We looked at the data on the S&P 500 going back to 1928. Since then, it has been positive in the month of January about 54% of the time, so basically a coin flip as to whether January will be positive or negative. However, in the years where January was positive, like this year, the market went on to finish the year up 87% of the time, and the average annual return for those positive years was more than 17.2%. Conversely, in years when January was negative, stocks were only positive 57% of the time, with an average return of only 5.5%, almost 12% less than the positive January years.

A historical trend is certainly not a guarantee of future results, but it is amazing how often these long-term historical trends continue to hold true. In our 2025 market outlook video a few weeks ago, we talked about why we're optimistic for the upcoming year, and after a great January, we wanted to add this historical trend as another reason for optimism in this upcoming year. As usual, we will also continue to be ready to take advantage of any volatility or temporary market declines that we'll likely see at some point this year.

Thank you, and I look forward to talking with you next Friday morning.