Breaking down the investing thesis of ‘how goes January, so goes the year’ The famous January Barometer is in serious danger of turning bearish for the rest of 2015. I’m referring to the indicator that says the stock market’s direction from February through December is foretold by what it does during January. Even after Thursday’s triple-digit gain for the Dow DJIA, -0.79% it still is slightly below where it started the year. Though the S&P 500 SPX, -0.55% is showing a year-to-date gain, it is just 0.2% in the black. In other words, the next six trading sessions (today and next week) are crucial: The remainder of 2015 rests very much in the balance. Or does it? To get an answer, I analyzed the barometer’s track record back to 1896, when the Dow was created. The accompanying table shows the difference in the market’s February-through-December returns following positive and negative Januarys.When the Dow in January ...Share of time Dow rose from Feb. 1 through Dec. 31Share of time Dow fell from Feb. 1 through Dec. 31Average Dow gain from February through DecemberRose74%26%8.4%Fell53%47%4.0%All years, regardless of market’s return in January67%33%6.8% On the one hand, notice that there have been higher odds of the market rising from February through December when the Dow rose in January than when it fell — 74% versus 53%. And the Dow’s average February-through-December gain following a rising January — 8.4% — is more than double the average following down Januarys (4.0%). To be sure, it’s not immediately clear how you should respond to those odds. After all, even when January is a downer, there still are above-even odds of the market rising from February through December. Last year was one such year, you may recall. The Dow, at the beginning of 2014, suffered one of its worst Januarys ever, losing 5.3%. And yet, from February through the end of the year, the Dow had one of its better periods — gaining 13.5%. As you contemplate in coming days how to respond to the possibility of a losing January, bear in mind that the first month of the year is not unique in its ability to “foretell” the market’s direction over the subsequent 11 months. In fact, as you can see from the accompanying chart, eight other months have at least some ability in this regard. Only three do not: August, September and October. Curiously, though, you never hear of, say, a May Barometer or a November Barometer. Rather than endow January with some magical forecasting ability, we simply should remind ourselves that the market exhibits trends. It’s a good thing when the market rises in a given month, and a bad omen when it does not. I’m reminded of the Wall Street saying: “The most bullish thing the stock market can do is go up.” So, yes, if the stock market ends up rising for the full month of January, we may want to become somewhat more confident that the bull market will continue — just as we might want to become less confident if the market declines in January. But it’s not clear that these shifts in confidence should be any different now than at any other time of year. Mark Hulbert