Founder’s Note: Grant Hawkridge is Down Under enjoying a hot summer, while I’m up here in Pennsylvania, freezing.
That’s OK. It all works out in the end, and I’m heading to Miami next week to meet with investors and watch the Hurricanes win the National Championship.
We are both still working. And here’s Grant with a data-based look at what’s happening so far in the first month of the new year. – JC
By Grant Hawkridge
G’day, Grant here again.
Here in Australia, January lands in the middle of summer. It’s a good time to step away from the screen, spend time with family and friends, and reset after a long year.
Fewer emails. Fewer alerts. Less noise. I hope you’ve had the chance to do the same over the holiday period.
Stepping away matters more than people admit.
When you’re glued to the screen every day, everything starts to feel urgent. Every move feels bigger than it is. You react instead of observe. Distance helps strip that away. You come back calmer.
You see the bigger picture again. You remember what actually matters.
Markets don’t reset the same way.
While most people are switching off, money is already shifting. New money is getting allocated. Old positions are being reassessed. Risk appetite is being tested quietly, before the headlines catch up.
Price starts to show whether investors are leaning forward or pulling back.
January is often the first clean read of the year, because it reflects fresh positioning rather than carryover emotion. It tells you whether investors are willing to put money to work after the reset, or whether they stay cautious.
That is where the January Barometer comes in.
What the January Barometer Is Really Measuring
The January Barometer was devised by Yale Hirsch in 1972. It’s been tracked for more than five decades, across bull markets, bear markets, recessions, and recoveries.
The idea is simple: As January goes, so goes the rest of the year.
The signal looks only at whether the S&P 500 finishes January higher or lower, and how the rest of the year has historically played out.
There are no indicators involved. No smoothing. No interpretation. Just price and outcomes.
It is not a forecast.
It is a tone-setter.
And January has a long history of setting that tone early.
When January Finishes Green
When January closes higher, history has leaned in favor of the bulls:
In positive January years, the market has finished the full year higher nearly 89% of the time, with a median gain of roughly 17%.
Strength has not just shown up early. It has tended to carry through the rest of the year.
February through December has usually done the heavy lifting, with participation staying broad and pullbacks resolving rather than compounding.
This is what healthier years tend to look like. Early strength invites follow-through. Risk appetite builds instead of backing away. Trends get time to develop.
A positive January does not mean straight-line gains. But it has historically tilted the tape toward continuation rather than frustration.
When January Finishes Red
The picture changes quickly when January ends lower:
When January finishes negative, the full-year outcomes lose their edge. Historically, the market has finished the year higher only about half the time, with a median return of -0.3%.
That’s a sharp drop from the strong follow-through seen after positive Januarys.
The path also changes. Drawdowns tend to run deeper and last longer. Volatility shows up earlier and sticks around. Some years do recover later on, but the ride is rougher and far less forgiving.
A negative January does not lock in a bad year. There are clear counterexamples. But the data shows that the tape becomes harder to trade. Trends fail more often and leadership rotates faster.
When January is red, patience still matters, but so does selectivity. You can still make money, but you usually have to work harder for it.
How This Fits Into the Bigger Picture
The January Barometer works best as context, not a trade trigger.
It doesn’t tell you what to buy or when to buy. It frames the type of year you are trading into, and how forgiving the tape may be when you put risk on.
So far, 2026 has started on solid footing. Early price action has leaned constructive, and the market has not rejected risk out of the gate. That is a positive starting point.
But January is not finished.
There are still many trading days left in the month, and the Barometer only counts where price closes, not how it starts. Early strength helps, but it does not lock anything in.
Historically, a positive January has created an environment where trends have more room to develop. Pullbacks tend to stay contained. Leadership has time to assert itself. Patience usually gets rewarded.
A negative January changes that tone. Rallies still happen, but they are less dependable. Drawdowns tend to travel deeper.
Risk management becomes more important because the market is quicker to punish hesitation and late entries.
That difference matters over 12 months.
It shapes how aggressively you press winners.
It shapes how quickly you cut losers.
January does not decide the year on its own. But it sets the initial conditions.
Once the month closes, the calendar stops being a talking point and starts becoming data.
From there, price takes over.
Happy hitting,🏌️⛳
Grant Hawkridge
Quantitative Analyst, TrendLabs