As goes January, so goes the year...
It's an old market adage. Not only is it quippy and easy to remember, but it's also the truth.
You see, markets have an incredible ability to keep trends going. When prices are rising, they tend to keep rising.
So when stocks are up in January, they tend to keep rising over the rest of the year. That's the setup we're seeing right now. But it isn't the only reason to expect more gains ahead.
We just finished an incredible 2023. And when you add that to last month's strength, our upside from here is even larger...
In fact, we could see an additional 15% return by the end of 2024. Let me explain...
According to history, a positive January usually means the gains will continue.
Since 1950, stocks have typically jumped 11.4% over the rest of the year if January was positive. That's much better than the usual 11-month return of 6.9%.
Plus, stocks were up 86% of the time after gains in January. That's a solid improvement from the 76% probability for all periods.
That's good news for investors today. The market finished up in January. Take a look...
Stocks were up 1.6% last month. And they hit a new all-time high in the process.
Those facts alone are bullish for the market. The trend is firmly in our favor. And sticking with the trend is always a smart choice.
There's more to the story, though...
Remember, 2023 was also an incredible year. Stocks jumped 26%, including dividends. And when you take that into account, the rest of 2024 is all but certain to produce great returns.
To see this, I looked at every winning January that followed a year of 20%-plus gains. These setups are rare... They've happened just 10 other times since 1950. And what occurred in the next 11 months was darn impressive. Take a look...
Again, stocks typically rise 6.9% after any kind of January. But stocks tend to perform even better when a positive January follows a great year. The typical return balloons to 14.8% by year-end... And the win rate is a perfect 10 out of 10.
Of course, even a perfect win rate doesn't mean that stocks are guaranteed to rise for the rest of this year. But it does tell us that the wind is firmly at our back.
Stocks are hitting new all-time highs. January led to gains. And that's coming off a fantastic year. Put simply, the trend is up... And we always want to buy when the trend is in our favor.
We've got plenty of reasons to expect prices to keep rising from here. And that's why we want to own stocks now.
"Good years tend to follow good years," Brett writes. Stocks staged a powerful two-month run in the final inning of 2023. This kind of year-end setup is rare. But according to history, similar cases have led to more gains the following year... Read more here.
"January tends to act as a 'bellwether' month," Sean Michael Cummings writes. Historically, investors can use January's performance to gauge whether it will be a good year for stocks or not. That's especially important in an election year... Learn more here.