January Trifecta Update: First Five Days Positive – Tune Out the Noise By: Jeffrey A. Hirsch & Christopher Mistal | January 08, 2026 | Email | Print

“Hope it’s worth all the noise” is a running joke around the Hirsch house when a family member (usually Jeff) knocks, drops or bangs something loudly. In our market analysis discussions lately, we have been coming back to a recurring theme of tuning out the noise from the news, market data scrutiny, Wall Street punditry and Fed jawboning.

 

President Trump’s operation in Venezuela, the subsequent changing story lines and rhetoric about other strategic moves in Greenland and elsewhere are a case in point for tuning out the noise. These sort of actions and commentary are all part of President Trump’s now well-known style, which the market has become desensitized to and less likely to be shocked by.

 

A couple of months ago the AI stock trade was dead. Sure, Mag 7 stock are struggling, but now memory chip stocks and copper are rallying on the AI buildout trade, plus rotation into many other sectors including small caps. Russell 2000 hit a new all-time high (ATH) today. DJIA hit two new ATHs in December and two earlier this week. S&P 500 hit two ATHs in December and one Wednesday. NASDAQ has not hit an ATH since October 29. So, we have some healthy bull market rotation. We are good with that.

 

In our view the market overweighs Fed commentary versus actual bond market action, and the Fed talks too much. We long for the old days, when Paul Volcker chaired the FOMC, and the Fed listened to the bond market and put up some guardrails on interest rates when the market and fiscal policy dictated such and refrained from the speaking tours the members currently seem so fond of. 

 

Back in March 2023 during Wall Street’s fearmongering of a pending broad banking crisis on the news of the historic yield curve inversion we quoted this excerpt from the end of the Minutes of the FOMC Meeting (under Chairman Paul Volcker) on August 18, 1981, the meeting just before the previous historic yield curve inversion in September 1981 to shed some light. (https://www.federalreserve.gov/monetarypolicy/fomchistorical1981.htm) 

 

“The Chairman may call for Committee consultation if it appears to the Manager for Domestic Operations that pursuit of the monetary objectives and related reserve paths during the period before the next meeting is likely to be associated with a federal funds rate persistently outside a range of 15 to 21 percent.”

 

It seems relevant again as the prospects for more extensive rate cuts grow thin and the end of the Powell-Fed nears. Perhaps the new Fed chair coming this May will herald in a new era, a rebirth, of neutral stewardship versus dictating policy. The Fed Funds Rate is effectively near neutral. With the 10-year treasury virtually flat since September and the 30-year trending slightly higher since Halloween, meaningful rate cuts are unlikely without a crisis. The likely floor for Fed Funds is around 3.0–3.25% give or take. CME Futures imply no cuts until possibly June. Inflation is largely flatlining around 2.5–3% in line with historical averages, resembling a more “normal” pre-2008 regime rather than a crisis backdrop.

 

While there is a plethora of bullish forecasts for 2026 (present company included), many from respected colleagues, there is also a good deal of market negativity out there, at least for some sort of meaningful correction in the near term. Valuations are high. Red lights flashing. Etc. Current market negativity seems overstated. Economic growth is holding up, inflation is stable, interest rates are accommodative and the AI Super Boom rolls on. 

 

 

On the heels of the Santa Claus Rally coming up a hair short the second leg of our January Indicator Trifecta, January’s First Five Days “Early Warning System” came in positive today. On the close of the market today, January 8, S&P is up 1.1% year-to-date and therefore our First Five Days (FFD) indicator is positive. Since 1949, the previous 50 positive (up) FFD were followed by 42 up full years and 8 down years with an average gain in all years of 14.2%. Of the 8 down full years, losses were double digit in just three; 1966 (–13.1%), 1973 (–17.4%), and 2002 (–23.4%). Conversely, 27 down First Five Days were followed by 15 up years and 12 down (44.4% accurate), with a paltry average gain of 1.1%. So, a positive FFD is meaningful. 

 

 

This is constructive news as our Santa Claus Rally (SCR) indicator was a near miss on Monday. Down SCRs are highlighted in the big table above. With SCR negative and the FFD positive there are two possible outcomes remaining for our January Indicator Trifecta. Our January Barometer (JB) can either be positive or negative. Because there has only been one year since 1949 when the SCR and JB were negative with a positive FFD (2015), we have combined both outcomes into a single table.

 

 

Removing 2015 and its negative JB from the limited data set above, yields an 11-month average gain of 9.8% and full-year average of 14.2% which is similar to historical average performance following all past positive FFDs in the table above.

 

 

Devised by Yale Hirsch in 1972, our January Barometer states that as the S&P 500 goes in January, so goes the year. The indicator has registered twelve major errors since 1950 for an 84.2% accuracy ratio. Including the eight flat-year errors (less than +/- 5%) yields a 73.7% accuracy ratio. For the record, in midterm election years FFD has a poor record. In the last 19 midterm election years, only 9 full years followed the direction of the First Five Days. However, full years followed January’s direction in 11 of the last 19 midterm election years. See page 16, 18, 20 and 24 of the 2026 Stock Trader’s Almanac for more.

 

Our base case bullish scenario outlined in our 2026 Annual Forecast for 8-12% gain in 2026 remains intact at least for now, until we get the full month January Barometer on the close of the market on Friday January 30, 2026. A positive FFD eases some of our negative SCR concerns. How the market trades for the rest of January and the result of our JB will weigh heavily on out outlook for full-year 2026. We will also be tracking the December Low Indicator (2026 STA, page 36) with its line in the sand at the Dow’s December closing low of 47289.33 from 12/1/2025.