'Trifecta of Bullishness' Could Bode Well for Stocks in 2023: Strategist

Analysis January 13, 2023 at 03:41 PM

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The stock market's early January rally may not guarantee a good year for equities, but history indicates it's a good sign, according to Ryan Detrick, Carson Group chief market strategist.

The fact that it followed a so-called Santa Claus rally in the holiday season could strengthen that outlook and form a "trifecta of bullishness" if the market also winds up higher this month, he suggested.

"It's been a strong start to 2023, with stocks up nicely after the first five days," Detrick wrote in a blog post published Thursday. "Although we'd never suggest investing based on five days, this is something many people watch for clues as to how the year might go, and it has a solid track record."

When the S&P 500 is higher for the first five days, "the full year is higher nearly 81% of the time and up 14.0% on average," and when those days are lower, "the full year is virtually flat and up only 54% of the time," he said, citing average results from 1950 through 2022.

When the year's first five days are up more than 1%, as they were this time, Detrick wrote, "the full year does even better, up 15.4% on average and higher more than 86% of the time."

In the 31 times that the full trifecta occurred, "the full year finished in the green more than 90% of the time and gained 17.5% on average," Detrick wrote. "Sure, this month isn't over yet, but we are off to a great start, and a higher January could be in the cards."

When the trifecta occurred after a down market the previous year — as in 2022 — the index on average posted a 27% return for the year, and a positive return every time going back to 1950, he showed in an accompanying chart.

"There are still many worries out there," Detrick wrote, "but we continue to see more positives than negatives, and we think 2023 could actually be quite a good year for investors."

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