Summary
Investors generally are bullish to begin a year, putting new money to work in the market and often benefitting from solid market returns in January and the first quarter. To draw that conclusion, we analyzed data collected on S&P 500 performance from 1980-2024. By our calculations, the stock market in January has advanced on average 1.0%, while the 1Q has generated average gains of 2.3%. The first quarter is fairly consistent as well, with a win percentage of 67%. This means that stock returns are positive in 1Q roughly two years out of three. To be sure, 1Q has posted its share of clunkers, including 2022, as investors fretted that the Federal Reserve had fallen behind the inflation curve. Let’s also not forget 2020, when the coronavirus emerged and the S&P 500 dropped 20%. In 2009, after the collapse of Lehman Brothers and as the U.S. economy was struggling with a deep recession, stocks fell 12%. And in 2001, as the “dot-com” bear market started growling, stocks slid 12% again. Investors also pay close attention to early-year returns due to the so-called “January Effect.” This axiom postulates that the market’s returns in January tend to foreshadow full-year results. For example, when January returns are positive, an
