With the S&P 500 closing January in the green, a powerful historical precedent was triggered—one known as the January Effect.
Made famous by Yale Hirsch in the Stock Trader’s Almanac, this market phenomenon suggests:
“As January goes, so goes the rest of the year.”
Historically, when January is positive, the full year tends to follow suit. When it’s negative, performance has been significantly weaker.
So how strong is this signal? Let’s look at the data:
Since 1950, January has been positive in 44 out of 74 years.
In 39 of those 44 years (89% of the time), the S&P 500 ended the year higher.
The average return in those years? +16.8%—far exceeding the long-term average of +9.3% per year.
In years when January was negative, the average return drops to -1.7%—a stark contrast.
Why does this work? Some point to tax-loss harvesting, others to simple momentum—strength begets strength. Critics will say it has no real predictive power. Maybe they’re right… but the numbers are hard to ignore.
With January 2025 now in the books as a positive month, will history repeat itself? What do you think—does the January Effect still hold weight in today’s market?
