• The January effect is the estimated seasonal trend in inventories for that month.

  • Since 1938, 29 out of 30 years of growth in January-February resulted in an average annual increase in the S&P 500 by 20%.
  • The January effect is supposed to occur when investors sell shares of winners to pay year-end capital gains tax in December and use those funds to speculate in weaker markets.
  • Like other market anomalies and calendar effects, the January effect is seen by some as evidence against the efficient markets hypothesis.