January: Bullishness on the Wane?


The end of December is nigh. Here’s a quick look at how the U.S. market has performed historically in January.

First the (misleading) numbers…

From this 30,000 foot view, January has solidly outperformed the average month, with almost twice the average and median return (at less volatility).

But averages can be misleading because they say nothing about how consistent an observation has been or whether it’s waxing or waning, so below I’ve assumed a trader was only long the S&P 500 in January (red) versus the average month (grey) each year since 1930.

[logarithmically-scaled, growth of $10,000]

The graph shows that January has outperformed the average month with some consistency over the last 80 years.

What isn’t clear from the graph is that this outperformance has waned in recent history. Below is the same test starting in 2000 (January red, average month grey).

[linearly-scaled, growth of $10,000]

January has not impressed over the last decade.

Some of this is no doubt a result of the general weakness in the market since 2000, but still, January bullishness is questionable.

Like all seasonality plays, this one has by no means been a sure thing and doesn’t by itself justify a trade, but because January bullishness has been on the wane, I’m calling the calendar month bias for January NEUTRAL.

See our Monthly Seasonality Map for DAILY seasonality predictions in January, and read more about the January Indicator (i.e. the ability of January to predict the remainder of the year).

Happy Trading,

. . . . .

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6 Responses to “January: Bullishness on the Wane?”

  1. 1 Alexandra Lux

    I think your charts are labeled wrong. You talk about January but they are all labeled December.

  2. 2 Don

    The subject is January returns but the charts are labeled December vs. average month. Is it the chart labels that are in error?

  3. 3 CarlosR

    Hey Michael,

    I think you meant to label the graphs “January” — or did I miss something?


  4. 4 Frederic Snoy

    Your charts seem to be for the month of December. Are they, or are just the labels wrong and they are really for January?
    Thank you for all your excellent posts which are helping us traders to stay on top of objectivity,

  5. 5 MarketSci

    Argh! A big THANKS to the commenters who caught my error. Data was right, label was wrong. A-ok now. michael

  1. 1 Tuesday links: future confidence Abnormal Returns

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