January Is a Month, Not a Market Indicator

New year, same old seasonal adage: So goes January, so goes the year. This, the so-called “January barometer,” has grabbed some headlines in 2026’s early days. But as a friendly reminder, what just happened doesn’t determine what will happen next—always look forward when making portfolio decisions.

Last Friday The Wall Street Journal reported two quick observations related to the January barometer:

• When the S&P 500 rises in January, it ends the year higher 79% of time^[i]
• January sports the Nasdaq’s best average return^[ii]

That implies January will supposedly tell you where stocks are headed for the rest of the year. Moreover, if you are bullish on Tech stocks, you should own them in January (and then presumably hold on because the year will be good, too).

We understand the appeal of a simple investment approach, but let us look under the hood. In 100 years of S&P 500 data, a positive January coincided with a positive year 53 times—by far the most common outcome. However, if January determines the year’s fate, why is the second-most common outcome a down January but positive year (21 times)? Exhibit 1 is for you visual learners, but to us, the main takeaway is that stocks tend to rise more than they fall—both in terms of months and calendar years.

Exhibit 1: What Does January Mean?

Source: Finaeon, Inc., as of 1/5/2026. S&P 500 Total Return Index, annual returns, 1926 – 2025. Note: For those of you who rightly note the full-year return includes January, the figures show even less “January effect” if you strip that month out and look at the 11 remaining months alone.

Moreover, January isn’t an anomaly. Exhibit 2 shares the number of times other months coincided with an overall positive year. In comparison, January looks rather ordinary, and we reckon it gets so much attention because it is the year’s first month. But if you argue one month’s return matters to the rest of the year, you would have a stronger case to say, “So goes April, so goes the year” or hyping up the “December effect.”^[iii]

Exhibit 2: So Goes December, So Goes the Year?

Source: Finaeon, Inc., as of 1/5/2026. S&P 500 Total Return Index, annual and monthly returns, 12/31/1925 – 12/31/2025.

While historical data debunk the notion January has special fortune-telling powers, the seasonality argument breaks down further when you consider why investors own stocks. Stocks represent slices of ownership in publicly traded companies, entitling shareholders to a share of future profits. Pray tell, what does January have to do with a Tech company’s (or any company’s) profits? No more than July does for the S&P 500.

Keep that in mind with the observation January is the Nasdaq’s best month. Sure, if you are optimistic about Tech, a cursory look at history suggests January would be a good time to buy: Since 1972, January boasts the Nasdaq’s best average monthly return.^[iv] But don’t confuse coincidence with causality. Dig a little deeper and on a median basis—the midpoint at which there are equal observations above and below to mitigate outliers—January shares the best monthly return with May. (Exhibit 3)

Then think about the flipside. The Nasdaq’s average monthly return is negative in September (the only negative average reading in the calendar, coinciding with the S&P 500). If you adhere strictly to these seasonal rules, wouldn’t it make sense to buy before January and exit before September? But hold on: Is the average more predictive or the median? And, a better question: Is your bullishness on Tech about fundamentals or an arbitrary calendar change?

Exhibit 3: The Nasdaq’s Average and Median Monthly Returns Since 1972

Source: Factset, as of 1/4/2025. Nasdaq Composite Index in monthly price returns, average and median, January 1972 – December 2025.

Those bullish on the Nasdaq are invariably bullish on Tech, given the sector’s large index weighting (over 60%).^[v] Yet modern technology is tied to the Internet, which didn’t exist as we know it back in 1972. So how does the Nasdaq’s January return since 1990—the decade in which the Internet took off—square with other months? Rather ho-hum, as January is just ahead of July and December, in line with May and behind October and November. That isn’t anything special in an Internet-driven world. (Exhibit 4)

Exhibit 4: Nasdaq’s Average and Median Monthly Returns Since 1990

Source: Factset, as of 1/4/2025. Nasdaq Composite Index in monthly price returns, average and median, January 1990 – December 2025.

Many investors tend to anchor their expectations to what just happened. For instance, stocks were up nicely in 2025, and while five of the Magnificent Seven Tech and Tech-like stocks lagged global markets, Tech did pretty well overall. After that run, sentiment seems firmly optimistic in the US, but still pre-euphoric. The positive vibes aren’t universal, though. Some argue stocks couldn’t possibly deliver another double-digit year again while others warn an AI bubble will bring the party to an end—echoing 2000. That a few experts are looking for clues on stocks’ direction based on January’s returns reflects some lingering skepticism, in our view. If broad euphoria had taken hold, investors wouldn’t be searching for reasons to avoid markets—they would be looking for reasons to jump in. In that spirit, January effect chatter provides some evidence of where sentiment is. Anything about the future is a stretch to us.