As January goes, so goes the year…

Most New Year’s resolutions die within a few weeks. So if you make it into February, you’ve likely formed a habit that will stick. It’s a similar story with stock returns…

What the market did in January can give us a pretty good idea of what it’ll do the rest of the year. It’s not a foolproof indicator. But some clear trends stand out when you look at the data.

These trends show that stocks tend to keep soaring after they finish January higher. And given the strong month that just ended, we could see a double-digit gain through the rest of the year.

Let me explain…

After a painful 2022, stocks kicked off 2023 with a bang.

The S&P 500 Index jumped 6.2% in January. That’s the best January return we’ve seen since 2019. (Prior to that year, the last stronger January was way back in 1989.)

This outperformance makes continued gains likely. The reason for this phenomenon is simple: The trend matters in the stock market.

Sure, it’s not deep fundamental research. You don’t have to do complex calculations or dig through earnings reports to see it at work. But decades of historical data show that when stocks are going up, they tend to keep going up.

Today, stocks are in a clear uptrend. Take a look…

You can see stocks’ incredible performance since the October low. And you can see their huge January returns as well. Stocks have finally gained some upward momentum for the first time since the start of the bear market.

That’s good news for investors in the months ahead… especially since last month was so strong.

You can see it in the table below. Going back to 1950, it shows what January performance means for stock returns in the months that follow…

Over all periods, stocks have typically jumped 6.8% in the final 11 months of the year. And the market has moved higher 75% of the time. What happens in January has a massive effect on those returns, though…

A positive return in January led to 11.3% gains over the rest of the year. And the win rate jumped to 86%. Meanwhile, if January was a loser, the rest of the year was barely in the green, rising just 0.7%… And the odds of a positive year dropped to 60%.

This data tells a clear story… What happens in January matters for the rest of the year.

We just finished a stellar January. And the overall trend is moving back in our favor for the first time since the bear market began.

Plenty of folks might still feel scared to buy right now… But this is no time to let fear rule your decisions. We’re seeing a big shift in the stock market. That means we want to focus on the opportunity and be bullish today.

Good investing,

Brett Eversole

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Source: Daily Wealth