January Barometer Positive: Base Case Forecast In Play By: Jeffrey A. Hirsch & Christopher Mistal | January 31, 2025 | Email | Print

S&P 500 gained 2.7% in January and thus our January Barometer is positive for 2025. Devised by Yale Hirsch in 1972, the January Barometer has registered 12 major errors since 1950 (with full-year 2024 included) for an 84.0% 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 .733 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 in 2023 when all three were positive and S&P 500 gained 24.2%. However, this year is just the fourth time that the SCR was down, while the FFD and the JB were positive.

 

 

Focusing on just the positive JB alone has a solid track record. Up Januarys are followed by up years, 88.9% of the time (40/45 years) with an average S&P 500 gain of 17.0%. 14 of 18 of the last post-election years followed January’s direction. When January is positive in post-election years (shaded in grey in table below), 8 of 9 full years were up with an average gain of 17.8%. 2001 was the exception. January was up 3.5%, but the full year was down 13.0%. (See STA 2025 page 18 for more.)

 

 

With our January indicators complete, we are affirming our 2025 Base Case scenario for average full-year gains of 8-12% with a lot of chop and weakness in Q1 and Q3. Seasonals continue to track, economic growth and the labor markets are holding up, but tariffs, additional rate cuts and AI costs remain significant concerns.