Summary
Investors are generally eager to start a year, putting new money to work in the market and often benefit from solid market returns in January and the first quarter. To reach that conclusion, we analyzed data we collected on the performance of the S&P 500 from 1980-2024. According to our calculations, the stock market in January has advanced 1.0% on average, while the 1Q produced an average return of 2.3%. The first quarter is fairly consistent too, with a 67% win percentage. This means that stock returns are positive in 1Q about two out of three years. To be sure, 1Q has posted its share of clobbers, including 2022, as investors worry that the Federal Reserve has fallen behind the inflation curve. Let's also not forget 2020, when the coronavirus emerged and the S&P 500 fell 20%. In 2009, after the collapse of Lehman Brothers and as the US economy struggled with a deep recession, stocks fell 12%. And in 2001, as the “dot-com” bear market began to grow, stocks slipped 12% again. Investors also pay close attention to early years' returns because of the so-called “January Effect.” This axiom assumes that market returns in January tend to predict full year results. For example, when January returns are positive, a