Summary
Investors are generally optimistic as they start a year, putting new money to work in the market and often benefiting from solid market returns in January and the first quarter. To draw that conclusion, we analyzed data collected on the performance of the S&P 500 over the period 1980-2024. According to our calculations, the stock market rose an average of 1.0% in January, while the first quarter generated an average gain of 2.3%. The first quarter is also fairly consistent, with a win rate of 67%. This means that stock returns are positive in the first quarter of approximately two out of three years. It’s fair to say that the first quarter has seen its share of clunkers, including in 2022, as investors worried 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 fell 20%. In 2009, after the collapse of Lehman Brothers and as the US economy suffered a deep recession, stocks fell 12%. And in 2001, as the dotcom bear market began to grow, shares fell another 12%. Investors also pay close attention to returns at the beginning of the year because of the so-called ‘January effect’. This axiom assumes that January market returns tend to predict annual results. For example, if January returns are positive, a
