January Barometer

The January Barometer is a theory that states that if the S&P 500 is up in the month of January, the stock market will be up for the remainder of the year as well. In other words, the January Barometer uses the first month of the year as a forecasting tool for the entire year. According to the Stock Traders Almanac, the January Barometer has been relatively accurate in its predictions. For instance, from 1950 to 2003, the S&P was up in January 34 times - 30 of which the January Barometer correctly predicted ended up trading higher. Based on that, the January Barometer has an 88 percent success rate. Despite that track record, some investors feel the January Barometer is a myth not to be trusted or treated as fact. Many factors can affect the January Barometer, such as a new presidential year. With so many contributing factors, the January Barometer, some argue, is best when "taken with a grain of salt." Supporters of the January Barometer adopt Yale Hirsch's infamous phrase, "As January goes, so goes the year."