As Goes January, So Goes the Year! Right?

As goes January, so goes the year…This is a catchy market adage that means how the market ends in January typically predicts how the market will perform for the year. In other words, if the market ends the month on a high note, it bodes well for a strong year and vice versa. For this reason, January is seen as a barometer for the market – and for good reason. The January Barometer, as it’s called, correctly predicted the S&P 500’s performance for the remainder of the year 75% of the time since 1945.

This post has been severely edited and abridged from the original article by Louis Navellier for the sake of clarity and brevity to provide you with a fast and easy read.

…Let me say, however, that I don’t put much stock in market adages. Long-time readers know that I am no fan of the “Sell in May and go away” adage and have always told investors that we should keep both feet planted in the stock market, not step out of it. The same holds true for “As goes January, so goes the year.” Remember, the January Barometer isn’t always right and besides, the market has a positive return 70% of the time going back to 1926, anyway. The reality is the strength we saw this January can be attributed, primarily, to one thing and one thing alone: earnings… and I can say confidently that earnings work 70% of the time.

Considering that much of the market’s strength over the past five weeks was driven by strong quarterly results and the fact that we still have a few more weeks left in the fourth-quarter earnings season, I think stocks can continue to meander higher. We may see some stocks back and fill around mid-February in order to digest their recent gains but, overall, February could be a relatively positive month.

The reality is the fourth quarter is typically the strongest quarter of the year for companies, and the fourth-quarter earnings season commences in January so stocks tend to consolidate these gains in February. Considering the market’s strength in November, December and January, there is a strong possibility that stocks will consolidate at the end of this earnings season in late February but, after that, I think it will be off to the races right up through the election. The fact is that year-over-year earnings comparisons are favorable this quarter, and they’ll remain that way for at least two more quarters this year.

Right now, tech companies, especially semiconductor names, are posting wave-after-wave of positive earnings results this quarter…and I fully expect them to remain market leaders, thanks to the artificial intelligence boom.

All in all, I fully expect the market to continue rewarding fundamentally superior stocks, just as it does during almost every earnings season.