The January Sweet Spot and the Year Ahead

• The S&P 500 rallied 1.4% during January.

• That same “sweet spot” has appeared 14 times since 1950.

• Historically, it’s led to a 17% average return over the next 12 months.

My love of data didn’t start on Wall Street, it started on a muddy soccer field…

I’ve been a sports enthusiast for as long as I can remember. Growing up, I lived on soccer and lacrosse fields. What hooked me wasn’t just the competition, it was the learning. Every practice, every game, every rep revealed something new I could fold into my play. It felt like having access to a fresh data mine every single day, and the possibilities were endless.

That curiosity naturally pulled me toward professional baseball after college. The sheer volume of information was astonishing. Every situation had a stat attached to it, whether it was the first inning or the ninth. And as the sport shifted into the “Moneyball” era, where managers leaned on probabilities and matchups to cut through the noise, I wasn’t surprised. The data had been pointing the way long before the strategy caught up.

That same connection sparked my love for analyzing stock market environments. The S&P 500 Index has nearly a century of return history. That means we have an enormous archive of political, economic, and behavioral patterns to study. One of my favorite charts maps the average return by month going back to 1928. It’s navigated wars, recessions, bubbles, booms, and everything in between. And it still tells a remarkably consistent story: staying invested over the long run has historically been the winning play.

Recently, I came across another data point worth chasing down. Ryan Detrick at Carson Research noted that since 1950, when the S&P 500 starts the year with a January gain between 0% and 2%, the rest of the year typically skews positively. I wanted to validate that myself and add more detail. So, I ran the numbers. And based on what I found, the S&P 500’s rally has every reason to remain intact through the end of 2026.

But don’t take my word for it, let’s look at what the data’s telling us…

The first place to start is January itself. Historically, the S&P 500 tends to rally about 1.2% on a price basis during the month, and it posts a gain roughly 63% of the time. It’s one of those seasonal tendencies that shows up often enough to matter, but not so consistently that it becomes a guarantee. The 1.2% average isn’t what happens every time January is positive, it’s simply the net result of all the ups and downs over nearly a century of data.

When you break the numbers down, the pattern becomes clearer. According to Yardeni Research, when January is a winning month, the S&P 500 doesn’t just inch higher, it typically rallies about 4.2%. And when it stumbles, it tends to fall around 3.7%. Blend those outcomes together and you arrive back at that 1.2% long‑term average.

Last month, the index stayed true to form, delivering a 1.4% gain. That’s comfortably inside the historical range and right in the middle of the cohort we’re studying…

So, the next step is to isolate the years when January produced a gain between 0% and 2%. Since 1950, that’s happened 14 times. From there, I ran my data based on a total return (dividends reinvested) analysis. I found that the S&P 500 tends to produce above average returns over the following 12 months…

In the table above, I’ve laid out each year, the January return, and the subsequent six‑ and twelve‑month performance. What stands out is how often the market builds on a modest January gain. A 17% average twelve‑month return is nearly double the index’s lifetime annualized gain of 9.5%. And while no pattern is perfect, the consistency here is hard to ignore.

At the end of the day, this is exactly why I chase down data like this. Markets don’t move in straight lines, and they certainly don’t follow scripts. But history leaves clues. And when a pattern shows up across multiple cycles, multiple environments, and multiple decades, it’s worth paying attention to.

If the past is any guide, a quiet January rally has often been the opening chapter of a much stronger year. Based on that precedent, last month’s performance points to a steady, durable rally in the S&P 500.

Five Stories Moving the Market:

Federal Reserve Bank of Cleveland President Beth Hammack said interest rates could be on hold for “some time,” with monetary policy most likely around a setting that neither restrains nor drives economic activity - Reuters. (Why you should care – Hammack, a voter, is one of the most hawkish policymakers at the Fed)

Federal Reserve Bank of Dallas President Lorie Logan said she’s hopeful inflation will continue to come down, though it would take “material” weakness in the labor market for her to support more interest-rate cuts – Bloomberg. (Why you should care – Logan, a voter and noted policy hawk, is recognizing there is a potential case for lowering rates)

U.S. President Donald Trump said he's considering sending a second aircraft carrier strike group to the Middle East to prepare for military action if negotiations with Iran fail – Axios. (Why you should care – such a move would likely be to increase pressure on Iran to strike a new and more restrictive nuclear and security deal that bans nuclear weapons, restricts ballistic missiles, and cuts ties to regional proxies)

Delinquency rates on loans ranging from mortgages to credit cards rose to 4.8% of all outstanding U.S. household debt in the fourth quarter, according to the NY Fed; this marked the highest level since 2017, driven by higher defaults among low-income and young borrowers – Bloomberg. (Why you should care – rising consumer stress could force the Fed to introduce more economic support sooner than later, in hopes of not taking larger measures down the road)

Fifteen years into the American Shale boom, U.S. gas production continues to reach new highs; the country has become the world’s largest exporter of liquefied natural gas and yet domestic manufacturers say they are increasingly cut off from fuel during the coldest winter days due to a lack of pipeline capacity – WSJ. (Why you should care – surging power demand will likely lead to an increased buildout of infrastructure resources to keep natural gas flowing)

Economic Calendar:

Earnings – APP, CSCO, CW, EQIX, GFS, HLT, HUM, KFC, MLM, NTES, SHOP, TMUS, VRT, WAB

Japan – National Founding Day (Holiday)

China – CPI, PPI for January

U.S. - MBA Mortgage Applications (7 a.m.)

U.S. – Average Hourly Earnings for January (8:30 a.m.)

U.S. – Nonfarm, Manufacturing, Private Payrolls for January (8:30 a.m.)

U.S. – Unemployment Rate for January (8:30 a.m.)

Fed’s Bowman (Board Member, Voter) Speaks (10:15 a.m.)

U.S. - Energy Information Administration Crude Oil Inventory Data (10:30 a.m.)

Treasury Auctions $42 Billion in 10-Year Notes (1 p.m.)

Canada – BOC Summary of Deliberations (1:30 p.m.)

U.S. – Federal Budget Balance for January (2:00 p.m.)