When it comes to trading, understanding the nuances of seasonality can provide significant advantages. Among the various months, January stands out due to its historical performance and unique characteristics.
A Bullish Start to the Year: Historically, January is part of the most bullish period of the year, beginning from the close on October 27th and lasting through the close on January 18th. Over the past 73 years, January has posted gains in 43 of those years. This strong start can set a positive tone for the market and often acts as a catalyst for investor confidence.
Impressive Returns: Since 1950, January and the S&P 500 has delivered an impressive annualized return of 11.92%, ranking it sixth among all calendar months. What’s even more notable is January’s performance on the NASDAQ. Since 1972, January has been the best calendar month in terms of annualized return, boasting a remarkable 28.62%.
The yellow dashed vertical line indicates the 9% average return for all months.
There are other more robust months, but January is solid. Next we have a chart showing annualized returns by groups of days in January since 1950 for the S&P 500 and since 1972 for the NASDAQ. There are defined bullish and bearish tendencies.
| DAY of the Month | S&P 500 % | NASDAQ % |
| 1-6 | + 38.30 | +60.46 |
| 7-13 | – 14.18 | +26.23 |
| 14-18 | + 29.84 | +50.08 |
| 19-22 | – 24.91 | -24.21 |
| 23-31 | + 24.08 | +28.02 |
It’s amazing how often these days of the month chart aligns nearly perfectly. Will 2025 be different? We shall see.
Key Sectors and Industries: To maximize potential gains in January, traders often look to specific sectors and industries that historically perform well. For January, the standout sectors since 2013 include:
- Communication Services (XLC)
- Technology (XLK)
- Energy (XLE)
The worst performing sector in January is materials (XLB).
Certain industries have shown particularly strong performance in January:
- Internet
- Home Construction
- Broadline Retailers
- Toys
- Oil Equipment and Services
- Medical Equipment
- Renewable Energy
- Multiutilities
By focusing on these sectors and industries, traders can align their strategies with historical trends and potentially enhance their returns. I personally use seasonality as a back up to the edge I already see in a position. When seasonality supports my thesis it’s another clue to support the position.
Conclusion: January’s robust performance makes it a crucial month for traders to watch. Its history of strong annualized returns, particularly on the NASDAQ, along with the notable performance of specific sectors and industries, provides traders with valuable insights for developing their trading strategies. By understanding and leveraging seasonality, traders can better navigate the market and optimize their investment decisions.
Enuf said.