As Goes January, So Goes the Rest of the Year: Market Mantra or Myth?
If you’ve spent any time in the markets, you’ve probably heard the old saying, “As goes January, so goes the rest of the year.” It’s one of those catchy stock market mantras that gets tossed around like a football during bowl season, and to be fair, it does sound good. The question is: does it hold up? Is January really the crystal ball of the stock market, or just another Wall Street superstition?
Let’s take a closer look at this January Effect, dive into the stats, and see if it’s worth factoring into your trading strategy—or if it’s better left as bar trivia for market nerds.
What Is the January Barometer?
The idea behind the January Barometer is simple: the performance of the S&P 500 in January sets the tone for the entire year. If January ends in the green, the mantra suggests the markets are poised for a strong year. If January tanks, well... don’t expect much cheer for the next 11 months. It’s been cited by traders and analysts for decades and is often viewed as one of those "rule-of-thumb" indicators.
The term was popularized by Yale Hirsch of the Stock Trader’s Almanac, who noticed the trend way back in the 1970s. Since then, it’s become a part of market folklore, cited by both casual investors and seasoned pros—though with varying levels of faith.
What Do the Numbers Say?
The January Barometer isn’t just a catchy phrase—it has some statistical weight behind it. According to historical data from the S&P 500:
- Since 1950, the January Barometer has been accurate about 75% of the time, meaning that in years when January was positive, the market ended up higher for the year.
- In years when January was negative, the S&P 500 closed lower for the year about 60% of the time. While not as strong, it still suggests some predictive power.
- In 2022, January was down a grim 5.3%, and guess what? The S&P 500 closed the year down over 19%, making it one of the worst performances since the financial crisis.
- In 2024, January was up 2.27%, and guess what? The S&P 500 closed the year up over 29%, far outpacing historical annual returns.
But it’s not always perfect. Take 2016, for example. January was an absolute dumpster fire, with the S&P 500 falling over 5% as recession fears gripped the market. Yet, by year-end, the market had completely rebounded, closing up a healthy 9.5%. The January Barometer took a loss on that one.
Why Does This Happen?
There are a few theories as to why January tends to be a bellwether for the year:
- Investor Sentiment Reset
January is when investors recalibrate. They’ve closed their books on the prior year and are positioning for what’s ahead. If they’re optimistic, the market often reflects that early enthusiasm. If they’re cautious, well, that shows up too. - Tax and Portfolio Adjustments
At the start of the year, investors reallocate portfolios, engage in fresh buying, or dump underperformers from the previous year. These moves can influence early market direction. - The "January Effect"
There’s also the January Effect—an entirely different phenomenon—which suggests small-cap stocks outperform in January as investors buy back riskier assets they sold in December for tax-loss harvesting.
When It Works—and When It Doesn’t
The January Barometer has had its fair share of wins and misses. Let’s highlight a few memorable years:
- 2019: January soared with a 7.9% gain, and the S&P 500 ended the year up a massive 28.9%. A big win for the mantra.
- 2020: January eked out a small 0.2% gain. But unless you were living under a rock, you know what happened next—a global pandemic. The market nosedived in March before rebounding to end the year up over 16%. The January Barometer gets an asterisk here.
- 2008: January was down over 6%, and the S&P 500 followed suit, closing the year with a brutal 38.5% loss. Ouch.
The mantra tends to work best during stable economic periods, but in years of major geopolitical events, pandemics, or Fed policy surprises, all bets are off. 2025 is full of major changes on the political front as well, making it more difficult to forecast.
Does It Matter for Your Strategy?
Here’s the thing: while the January Barometer has some historical merit, it’s not gospel. Markets are influenced by countless factors—earnings, interest rates, geopolitics, you name it. One month of data, even January, can’t capture all of that.
But what it does do is set the tone. A strong January can boost investor confidence, creating momentum for the year ahead. A weak January? It might signal caution, but it’s no reason to panic. After all, the market is more marathon than sprint, and plenty of years have turned around after rough starts.
Bottom Line
"As goes January, so goes the rest of the year" is a fun mantra with enough historical backing to keep it in your market toolbox—but not enough to let it drive your entire strategy. Like all indicators, it’s just one piece of the puzzle, not the whole picture.
As January approaches, keep an eye on how the market behaves. But remember: the stock market is full of surprises, and Santa’s sleigh can sometimes outrun the January Barometer. Stay informed, stay disciplined, and don’t let one month define your entire outlook.
More importantly, being part of a trading community can make all the difference. It’s not just about analyzing trends—it’s about learning from each other, sharing insights, and staying accountable to your goals. Now is the perfect time to get back into our classes, refine your strategy, and build a plan that keeps you on track all year long.
At the end of the day, whether January soars or stumbles, what really matters is having a plan, sticking to it, and surrounding yourself with the right people to help you stay the course. Let’s make this year your best yet—together!