Don’t Blink: History Says January Predicts the Market with 73% Accuracy
The S&P 500 is very close to hitting our target of 7000 with a few trading days left in 2025. We are bullish in 2026 with our target of 7800. Of course, guessing where the S&P 500 lands brings with it a lot of unknowns, which is the case in any given year. January is critical, let me tell you why. The stock trader’s almanac states that January predicts the year’s course with a .733 batting average. Every down January on the S&P since 1950, without exception, preceded a new or extended bear market, flat market, or a 10% correction. If the S&P gains in January’s first five days, it precedes full-year gains 83.3% of the time. In other words, hope for a good January.
Alphabet Inc. (GOOG) looks like it is ready to break out. And look at IBIT, the iShares Bitcoin Trust ETF, which is re-testing its lows, and it looks like it has based and is ready to move higher. Gold has been moving higher, which we feel is taking away from the Bitcoin trade and we should start to see a rotation back into IBIT.
We are hitting the sweet spot-on jobless claims. Initial claims for unemployment insurance fell 10,000 last week to a lower-than-expected 214,000. It was the sixth decline in the past seven weeks, keeping initial claims range-bound since late-2021 and low by historical norms. Despite slower job growth and other signs of the labor market cooling off, the initial claims data suggests that layoffs remain subdued, which is consistent with continued economic expansion.
Real GDP surprised to the upside in Q3, rising at a 4.3% annualized rate, the fastest pace in two years, and above the final GDP estimate of 3.5%. Most major GDP components made positive contributions, led by consumer spending and net exports. Government spending strengthened, and capex growth moderated, while residential investment remained a drag.
On a y/y basis, real GDP was up 2.3%, staying on track for a solid expansion this year, despite the policy upheaval and a likely dent to output growth in Q4 from the record-long government shutdown.
