The stock market’s January Barometer stipulates that as goes the S & P 500 in January, so it goes for the entire year. This year’s January Barometer points in the direction of future gains for the remaining 11 months of the year — not guaranteed, but favorable. Through Thursday, with only one trading day left in the month, the S & P 500 is higher by 3.2% in January, even after falling 0.5% so far this week in the wake of the DeepSeek artificial intelligence adventure . What’s more, the Russell 2000 small-cap index is higher by 3.5% and the Nasdaq Composite by 1.9% this month, the latter after slumping 1.4% so far this week. “I am rather encouraged by the market’s gains so far this January with one day to go,” said Jeffrey Hirsch, editor in chief of the Stock Trader’s Almanac . That’s despite the slide on Monday as Wall Street interpreted the effect of China’s DeepSeek on other AI stocks. “It’s bullish. But 2025 gains will be tougher and [more] shallow than the past two years,” Hirsch noted. After back-to-back annual gains of more than 20% in the S & P 500 in 2023 and 2024, Hirsch foresees 8% to 12% growth in 2025, “with a lot of chop and weakness in Q1 and Q3.” While concerned about the level of inflation and high valuations, he expects “the bull market to continue through 2025, though it will likely be a much bumpier ride than it has been the last two years.” The reason why the Street likes the January Barometer is because it has worked so well as a predictive weather vane. Rising stock prices in January have been followed by up years for the market as a whole nearly 84% of the time since 1950, the Almanac says. In years after presidential elections, the indicator has worked nearly 80% of the time. So long as the S & P 500 closes above about 5,882 on Friday, “the January Barometer will generate a bullish signal for 2025 full-year and February-December returns,” said Stephen Suttmeier, chief equity technical strategist at Bank of America Securities. The S & P 500 closed Thursday at 6,071. While this January’s market performance is bullish, Hirsch is cautious about the rest of the first quarter, in February and March, because the quarter is “a weak spot of the 4-year [presidential] cycle.” While some air has recently leaked out of the “AI Tech Craze … the broadening participation and sector rotation is welcome.” As with so much else on Wall Street — and so many of its tried and true magic bullet indicators — it is often best to just acknowledge them as accepted wisdom and not necessarily question where they came from or how or why they work.
