January Barometer

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January Barometer 

Yale Hirsch developed the January Barometer in 1972 by looking at the first five trading days of January and then looking at the return for the month of January to see if he could predict how the rest of the year would perform.


The indicator is supersized if we have a greater than 2% return in the first five trading days of the year. With yesterday’s fall, that didn’t happen, but the first five days did finish in positive territory and that’s still a good sign.

The last 46 times the Early Warning System showed positive returns, the full year for the S&P 500 was positive 38 times, 82.6%, with an average gain of 14.3%.



Ok, so we’ve cleared the Early Warning System, so now it’s on to see what the rest of January will look like.

Since 1950, if January was positive the full year was positive 85.7% of the time with average gains of 17.6%.



Keep in mind that the market has a bullish bias and there are other months and 5-day periods that are more correlated with positive yearly returns, but I understand why everyone looks to January as hope for the future. No one is going to wait to see how April does before they start investing for the year, even though April has been more correlated with yearly returns in the last decade.

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