A theory stating that the performance of the S&P 500 in January predicts its performance for the remainder of the year. That it, if the S&P ends January higher than it began, there will be a rising stock market and vice versa. Investors using the January barometer make investment decisions based on this performance; they buy S&P 500 stocks when performance is strong in January and sell when it is not. The January barometer has had mixed results over the years.
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The tendency of stock market movement in January to set the market trend for the entire year. Thus, if a market average is higher at the end of January than it is at the beginning of January, chances are that the year will produce a rising market.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.