Historically, January has seen some unique stock market trends. The first is that smaller and statistically cheaper stocks tend to perform better during early January. Secondly, January itself is often a relatively good month for stocks at least based on 1941-2003 data, though that has been called into question more recently. Lastly, early January has had some predictive power for overall market returns for the year. None of these trends are a sure thing, but they have historically had some predictive power.
The January Effect
Mark Haug and Mark Hirchey of the University of Kansas in a 2005 paper examined data from 1802 to 2004. They found that small cap stocks tended to outperform in January on average, and that momentum stocks (stocks that have risen strongly in price recently) tend to underperform in January.
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