by Gary Alexander

January 30, 2024

I hope you all know by now that the market doesn’t care who wins Super Bowl 58 – or whether global warming will return earlier than usual if a Groundhog named Phil shows his head this Friday – but some investors still cling to other outdated myths, like the January Indicator (“so goes January, so goes the year”), or the magic pixie dust of a Santa Claus Rally – which technically refers to a year-end boost spanning the last five trading days of December and the first two days of January – which failed this year.

This year, a red-hot November/December market rally finally endured its first multi-day correction during the famed Santa Claus rally week, declining over 1% from the S&P 500’s pre-Christmas close to January 3, 2024, the second trading day of the New Year. That followed a meteoric 15.5% rise in the S&P 500 from Friday, October 27, 2023, to the Friday before Christmas. But after that 1%+ sag in the Santa Claus rally week, the S&P 500 recovered for a 4% gain through last Friday, January 26, 2024.

As for the reputedly reliable “January Indicator,” it’s barely worth a coin flip – a 50% bet. We don’t know yet if this January will finish up or down, but it really doesn’t matter. You’ve probably heard that January is a strong month – and that was true during the 20th Century – but it may surprise you to discover that January isn’t such a great month during the 21st Century, with only 11 rising January months and 12 falling Januaries, and the January Indicator only worked 12 of 23 times (52%), just above a coin flip.

  • In 23 years (2001-23), January rose 11 times. The S&P 500 rose eight of those years, falling 3 times.
  • From 2001 to 2023, January fell 12 times. The S&P fell only 4 of those times, rising 8 times. Oops!

More appropriate to our current realities (and recent memories), since the 2007-08 Great Financial Crisis, the January Indicator is even less reliable. Since 2009, the January Indicator has only worked in seven of 15 years (47%), or less than a coin flip, and January has actually been a negative month in 8 of those 15 years (53%), belying its previous record and reputation of being a positive month. In fact, in those 15 years, February (with a negative historical reputation) was up 9 times, vs. only 7 positive January months.

The January Indicator Since 2009 Table

I’m not cherry-picking the starting date. The 2003 bull market began with a declining January (-2.74%) and a +26.4% full year. Before that, a rough 2001 (-13%) began with a +3.74% January. In 1998, the Dow was down in January, while the S&P was up 1%, so it was tough to read, but 1998 rose near 20%.

In most seasonality claims these days, they say January is a positive month and February is negative, because such studies usually started 50 or 100 years ago, but I don’t care what happened that long ago.

The Incredible January Effect Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Most of these familiar indicators (Super Bowls, Santa Claus, Hemlines or January Indicators) were based on looking backward in search of a string of coincidences. Statisticians like to look for any common denominator – some as silly as Super Bowl winners, hemlines or Triple Crown-winning horse races – and then predict the future based on a football team’s division, or a super-horse, or a skirt’s length, but one of the basic laws of statistics is that a coin flip is always a 50-50 proposition, no matter how many times it came up heads or tails in the past. In the 20th century (above), for instance, January and February were robust, and March was weak, but since 2001 – which is far more relevant today – the opposite is true:

Standard and Poor's 500 Index Average Monthly Returns Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Unless there is a logical reason why some outside event or calendar cycle should impact the market, I’d say that such a theory is often based on a statistical coincidence, an anomaly, that fits well historically but is not likely to fit well in the future. One major exception I have found is the 4-year Presidential cycle, since national leadership impacts economic policies in a major way. Fourth-quarter year-end tax trading, or April tax trading, is another logical seasonal marker, but there are very few reliable seasonal indicators left standing, in my view. Most calendar systems and external trading cues have faded in value over time.

Gold (and Silver) Seasonality is a More Clearly Defined

Today marks an important anniversary in gold history. It was 90 years ago today that President Franklin D. Roosevelt revalued the price of gold up 69%, in a time of massive deflation – on his birthday, no less.

On January 30, 1934, FDR signed the Gold Reserve Act, revaluing gold from $20.67 per ounce, where it had stood for 100 years, to $35.00 per ounce – after repatriating most of the nation’s privately-held gold coins and bars at $20.67 per ounce the previous April, under threat of hefty fines and jail time. Americans were not legally allowed to hold gold bullion or legal tender U.S. coins for over 40 years, until late 1974.

Gold’s other red-letter dates in late January were, first, its major discovery in Sutter’s Mill on January 24, 1848, leading to the 49ers (a world of gold-seekers, not the NFL football team, winner of five Super Bowls so far), and January 21, 1980, the date of gold’s all-time “real” (adjusted for inflation) high price, even though that was just a one-day spike. Gold was at $750 the day before and after that one-day spike.

Gold Price Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

There is a plausible reason for a distinct seasonal cycle in precious metals (charts, below). Fund manager Frank Holmes calls it “the love trade.” Around Christmas, you see a boatload of jewelry ads for rings or other tokens of love for your spouse or partner. These aren’t limited to the Christmas season. Valentine’s Day is coming soon (as is my wife’s birthday in February, or our 56th anniversary, just past, January 14).

In Asia, where there are far more people, and rapidly rising wealth, there is India’s Diwali in November and the Chinese New Year in early February this year, both involving gold jewelry as auspicious gifts.

Gold and Silver Futures Seasonality Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

OK, if November through February is the peak of the holiday “love trade,” then why does gold demand rise fastest in late summer – August to September? Because that’s when jewelers need to order bullion to fabricate their intricate products to put on sale from October to January for shoppers for those gifts.

So far in January 2024, gold is down 2.1%, but gold tends to move in a mirror image to the U.S. dollar, and the U.S. Dollar Index (DXY) is up exactly +2.1%, so gold is neutral in terms of a wide basket of other currencies. Gold tends to act opposite to the U.S. dollar, and it also often trades opposite to stocks.

For investment purposes, gold serves as a ballast to your portfolio, usually taking the place of currencies, cash, or even bonds, but not replacing stocks. It is also a crisis hedge. This month, the world is voting for the dollar as a crisis hedge amid various wars and rumors of wars, but if the nations of the Middle East and Asia revert to form, they will likely elect to buy gold over the dollar as their preferred crisis hedge.

It might be best to buy gold and good stocks during any doldrums of slower demand, and that could be the next six months for precious metals, or the next two months for stocks in a presidential election year. Why? Here is a chart our colleague Jason Bodner introduced in early January. He charted the 11 election years since 1980. The first quarter fell by -1.5% vs. the usual +2.1%, but the rest of the year rose by 8.1%.

Standard and Poor's 500 Index Gains Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

To me, this means the first quarter could give us a great opportunity to buy stocks or gold on sale.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
The January Barometer Holds 2024 Promise

Sector Spotlight by Jason Bodner
Market Secrets From “Another Planet”

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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