Every new year, seasoned investors and market-watchers turn their gaze to an old adage: as goes January, so goes the year. This ‘January Barometer’ suggests that the performance of the share market in the first month sets the tone for the next eleven. But does this Wall Street saying hold water for the ASX in 2025, or is it just another market myth?
What is the January Barometer?
The January Barometer is a market theory first popularised in the US, positing that if stocks rise in January, the rest of the year will also be positive—and vice versa. It’s a catchy concept that often grabs headlines as the calendar turns, but its track record is far from perfect.
For the ASX, the January Barometer has gained more attention in recent years as Aussie investors look for patterns amid global volatility. In 2025, with economic signals mixed and market sentiment fragile, many are again asking: should we trust the barometer?
Does the January Barometer Work on the ASX?
Let’s cut to the numbers. Historically, the January Barometer’s predictive power for the S&P/ASX 200 has been patchy:
- Over the last 20 years, when the ASX 200 rose in January, the full year finished higher about 70% of the time.
- But when January was negative, the index still ended the year in positive territory roughly half the time.
In 2024, for example, the ASX 200 was flat in January but rebounded strongly by the year’s end, defying the barometer’s call. Market experts warn that January is often influenced by short-term factors—holiday trading, tax-loss selling, and post-Christmas optimism—that don’t necessarily reflect the underlying economic trends.
2025 Outlook: With inflation moderating, the RBA maintaining a cautious stance, and China’s economic recovery still uncertain, the ASX’s January moves may say little about the rest of the year. Don’t forget: global factors (think US Fed policy, commodity prices, or geopolitical events) can quickly override any early signals.
Why Investors Still Watch January Closely
If the January Barometer is unreliable, why does it persist? There are a few reasons:
- Psychology: Investors crave patterns and certainty, especially after a volatile year.
- Media Hype: Financial media loves a simple story, and ‘January sets the tone’ is an easy headline.
- Momentum: Sometimes, strong starts do boost confidence, driving more buying and potentially reinforcing the trend.
However, relying on the barometer can lead to missed opportunities or costly mistakes. January’s moves are only one piece of the puzzle—smart investors look deeper.
How to Use (or Ignore) the January Barometer in 2025
Rather than making knee-jerk decisions based on January alone, consider these steps for a more robust investment strategy this year:
- Track Fundamentals: Keep an eye on economic data, company earnings, and RBA policy statements throughout the year.
- Stay Diversified: Don’t bet your portfolio on one month’s performance. Spread your risk across sectors and asset classes.
- Watch for Policy Shifts: The RBA’s next moves on interest rates—and their timing—will likely have a bigger impact than January’s numbers.
- Remain Patient: Market gains (or losses) are rarely linear. Be ready for surprises, and don’t let one month dictate your year.
Conclusion: January is Just One Chapter
The January Barometer offers a fun talking point, but it’s no crystal ball for the ASX—or any market. 2025 is shaping up to be another unpredictable year, with global and domestic forces pulling in different directions. For Australian investors, the real edge comes from staying informed, disciplined, and focused on the long-term, not just the first 31 days.
