The January Barometer in the 21st Century: Does January Still Predict the Rest of the Year in the U.S. Stock Market?

Abstract

According to a famous Wall Street saying, "as goes January, so goes the year." Popularly known as the January barometer, it claims that the stock market's direction in January predicts its direction for the rest of the year. This paper tests the predictive performance of the January barometer in the 21st century. Using Center for Research in Security Prices (CRSP) value-weighted U.S. market returns from 2001 through 2025, January returns are compared with February-December returns using descriptive statistics, chi-square test of independence, regression, and Welch's t-test, along with other robustness tests. The barometer correctly predicted the direction of the rest of the year in 14 of 25 years (56%). The market went up in 19 of the 25 years, so the barometer performed worse than simply predicting a rising market over the year. The chi-square test detects no relationship between January's direction and the rest-of-year direction (χ² = 0.12, p-value = 0.73). The OLS regression shows that January returns explain less than 1% of the variation in rest-of-year returns (slope coefficient = 0.23, p-value = 0.78). On average, February-December returns after up Januarys (11.3%) and down Januarys (9.2%) are also not significantly different (p-value = 0.80). Additional robustness tests also confirm that the January performance has not reliably forecasted the performance of the rest of the year in the 21st century.

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