Good morning, investors. It’s true you can find data to support any theory, but that doesn’t negate that so much of what happens in the investing world is built on superstition and tradition.

Few ideas capture that tension better than the January effect.

🚨Today we’re releasing an interview with a JPMorgan global strategist who is one of Wall Street’s leading voices on AI and the infrastructure boom.

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Wall Street has long embraced the idea that January sets the tone for the year.

According to market lore, the first five trading days can predict whether stocks rise or fall over the next 12 months. The simplicity of the so-called January effect has helped it endure, and it’s also backed by a tidy narrative: 

Yet the numbers tell a more restrained story.

In a note to clients, DataTrek Research examined the relationship between January performance and full-year returns, finding that predictive power improves the wider the sample window. 

The first trading day of the year, for example, has virtually no tie to annual returns.

Expanding to the first five days strengthens the odds somewhat, but the correlation remains modest. 

That said, the benchmark index is positive in the first week during most years, and when it is, annual returns are nearly three times higher than in years that begin with losses.

The full month of January — the fourth strongest of the year — delivers the strongest signal. 

Since 1980, the S&P 500 has finished the month higher about 60% of the time, posting an average gain of 4%. In those years, stocks went on to finish the year higher 86% of the time with an average return of 16.1%, according to DataTrek.

Indeed, the correlation between January’s result and the full year stands at 0.44, a level DataTrek co-founders Nick Colas and Jessica Rabe see as “relatively high for a simple, one-variable model.” 

“Like any stock market heuristic it doesn’t work every year, but history shows a positive performance for the S&P in January tends to lead to much stronger returns for the year overall,” Colas and Rabe said.

Notably January closes negative, stocks often recover anyway though the annual return in those instances falls into the low single digits.

So while the month doesn’t exactly define the year as legend suggests, a strong start does tilt the odds more favorably than a weak one.

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🚢 Venezuela will give the US up to 50 million barrels of oil. That’s what President Trump said late Tuesday, adding that the crude will be sold at market price and the resultant capital will be used to benefit the people of the US and Venezuela. (CNBC)

📈 Stocks hit new records on Tuesday. The S&P 500 reached an all-time high while the Dow closed above 49,000 for the first time ever. Geopolitics, it seems, are not the risk-off event they once were. (CNBC)

🛢How much oil does Venezuela really have? The country’s self-reported 300 billion barrels of oil are unaudited, and include heavy oil reclassified under former president Hugo Chavez. Rebuilding the energy infrastructure there could require $183 billion. (Barron’s)

📉 AMD stock slipped 3% Tuesday. Shares fell despite CEO Lisa Su sharing that demand is exploding for the company’s products and chips. AMD is coming off a 77% return in 2025. (Bloomberg)

🗓January 7, 1782: The Bank of North America opened in Philadelphia, marking the first commercial bank in the US.

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📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter and host our show, Full Signal, to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].