The stock market could post monster gains in 2024 if a ‘January Trifecta’ is realized. Here’s what needs to happen.

Trader NYSE green — Lucas Jackson/Reuters

The stock market could see supercharged gains in 2024 if the “January Trifecta” materializes.
The indicator tracks the performance of the Santa Claus rally, the first five trading days of January, and the month of January.
The S&P 500 has posted a median annual return of 17% when the January Trifecta occurs.

The strong gains seen in 2023 could spill over into 2024 if the “January Trifecta” materializes, according to data from Grant Hawkridge of All Star Charts.

The trifecta refers to three stock market indicators that all have to flash positive during the month of January. When they do flash, strong stock market gains tend to follow, according to historical S&P 500 data going back to 1950.

The trifecta has flashed 31 times since 1950, delivering a positive calendar year return 90% of the time with a median gain of 17.2%. If such a gain materialized in 2024, the S&P 500 would be trading at just under 5,600, which is higher than the most bullish forecasts on Wall Street.

The last time the indicator flashed was last year, when the S&P 500 ultimately delivered an annual return of 24%. Before that, the indicator flashed in 2019, delivering an annual return of 29%.

The three times the stock market moved lower despite the January trifecta occurring was in 2018, 2011, and 1966.

These are the three indicators that need to flash this month for the trifecta to happen:

1. The Santa Claus Rally

The S&P 500 needs to post a positive return during the Santa Claus Rally, which is a trading window that includes the last five trading days of December and the first two trading days of January.

Stocks are teetering on the edge of flashing this signal. The S&P 500 is down 0.10% since the trading window opened, and there’s still one full trading day left.

2. The first 5 trading days of January

The S&P 500 needs to post a positive return during the first five trading days of January for the trifecta to happen.

Stocks kicked off the first trading day of January with losses, with the S&P 500 falling more than one-half of a percent. Historically, stocks have tended to post strong gains when the first five trading days of January were positive.

3. The January Barometer

The S&P 500 needs to post a positive return during the month of January for the trifect to happen. That means investors won’t know if the January trifecta has flashed until the end of the month, assuming the Santa Claus Rally and first five trading days of January are positive.