Positive January Barometer Keeps Base Case Forecast In Play
By: Jeffrey A. Hirsch & Christopher Mistal
January 31, 2024
S&P 500 gained 1.6% in January and thus our January Barometer is positive for 2024. Devised by Yale Hirsch in 1972, the January Barometer has registered 12 major errors since 1950 for an 83.8% accuracy ratio. This indicator adheres to propensity that as the S&P 500 goes in January, so goes the year. Of the 12 major errors, nine have occurred since 2001. Including the eight flat years yields a .730 batting average. 
Our January Indicator Trifecta combines the Santa Claus Rally (SCR), the First Five Days Early Warning System (FFD) and our full-month January Barometer (JB). The predicative power of the three is considerably greater than any of them alone; we have been rather impressed by its forecasting prowess. It was certainly on the mark last year when all three were positive and S&P 500 gained 24.2%. However, this year is just the fourth time that the SCR and FFD were down, and the JB was positive.
[Trifecta Table – Down SCR, FFD & Up JB]
As you can see from the table above, a positive JB has significantly improved the performance over the next 11 months and for the full year compared to when all three January indicators were down. In the prior three years when the SCR and FFD were down, but the JB was positive, next 11-month and full year gains averaged 15.1% and 19.9% respectively. This compares quite favorably to when all three January indicators were down as the next 11-months averaged just 0.2% and full year averaged a loss of 3.6%.
With our January indicators complete, we are affirming our 2024 Base Case scenario for full-year gains of 8-15% for DJIA and likely a bit more by S&P 500 and NASDAQ. Seasonals continue to track, inflation is cooling, economic growth is holding up and the Fed will likely be cutting rates later this year. We suspect the rate cuts will not happen as soon as many would like, and this could contribute to some weakness and choppy trading early this year.