Published January 31, 2025
More than any other month of the year, January’s performance is closely tracked by market watchers as a sign of things to come. Below, Blake Millard provides the data behind the notion that January’s performance tells the tale for the remainder of 2025.
“Friday marks the end of January and the seasonal trend known as the January Barometer. The January Barometer is the belief that investment performance of the S&P 500 index in January can predict its performance for the rest of the year.
“As January goes, so goes the year.”
If buyers win the battle against sellers in the month of January, the historical data shows that stocks tend to hold onto those gains. What’s more, the hit rate is off the charts.
If January is positive, the median return for the rest of the year is +13.4%, with an 86% win ratio.
If January is negative, the median return falls to +3.5%, with a 60% win ratio.
Strength in January begets more strength for the rest of the year.
Full calendar year performance is night and day different when January is positive. Reference the bottom of the table below.
The key is a positive close for the month.
Finish higher than 5881 for the S&P 500 index and it would strength the case that markets finish 2025 in the green.
Thursday’s close was 6071.
Unless we have another DeepSeek moment, things are looking pretty good for the January Barometer in 2025.
Of course, this signal firing green is not enough alone to carry the market higher. It’s just one piece of a giant puzzle.
Similar to other seasonal patterns like the “Santa Claus Rally” or the “First Five Days Indicator,” these signals provide us information about the type of market environment we’re in.
Are stocks behaving as we expect them to? Or are stocks misbehaving?”
Market Update
After two years of almost non-stop gains, AI stocks got rocked Monday. The announcement of a cheaper AI technology from China called DeepSeek rattled investors sending all AI-related stocks sharply downward. Market darling and AI chip supplier Nvidia fell almost -20% in the one-day rout. That move alone was enough to drag the broader market notably lower. But gains in Apple and other market sectors helped limit the broad market damage. The Nasdaq 100 (QQQ) slid -3% while the S&P 500 logged a loss of half that amount. Investors bought the dip Tuesday recovering about half of Monday’s slide. Buyers looked past the initial shock of DeepSeek concluding that the competition and lower-cost solution would ultimately benefit the industry overall. A small -0.5% step backward Wednesday on the outcome of the Fed’s meeting. The central bank held interest rates as is, which was widely expected, and seemed to indicate there would not likely be any changes until they see quite a bit more data. Earnings from Microsoft and Meta provided the fodder for traders Thursday. The results from the two companies were mixed though both noted that the DeepSeek news wouldn’t change their massive AI spending plans. Indexes showed some relief and rose +0.5% Thursday. An in-line inflation report and fairly good results from Apple got stocks off to a positive start Friday. But an afternoon selloff derailed the rally as investors weighed the potential impact of Trump administration tariffs on Canada, Mexico, and China announced late Friday. Stocks closed the day -0.5% lower. Friday also closed a solid month of January for the stock market, after a shaky start early in the new year.
Stocks staged a decent recovery from Monday’s DeepSeek selloff. But the S&P 500 still ended the week down by -1.01%. The Nasdaq 100 (QQQ) tumbled -1.39% after being down almost -4% near the open of the week. Small cap stocks, largely unaffected by the AI tumult, slid on the tariff news to a -0.97% dip.
Warm wishes and until next week.