The January Effect: Does the STI Always Rise in January?

The January effect is a hypothesis that the stock market tends to outperform in the first month of the year. The effect was first observed in 1942 by investment banker Sidney B. Wachtel and that small-cap stocks tend to perform better than the broader market in January.

There are a few reasons why stock prices tend to rise in January but I wanted to find out if the January effect holds true in Singapore as in the U.S.

Can investors simply ride the January effect and make decent gains simply by investing in the STI for the first month of every year?

I decided to do some research: I had a look at the STI chart and recorded how much the STI gained (or lost) from its opening price on the first trading day in January to its opening price on the first trading day in February from 1990 to 2015.

STI chart 1990-2015

STI 1990-2015: Yahoo Finance

Does the STI rise every January and, if so, by how much? Here are the results:

YearJan OpenFeb Open% Change

From the data over the last 26 years:

  • The STI made gains in the month of January for 15 out of 26 years
  • The STI remained flat in January for three of those years (1997, 2009, 2011)
  • The STI made losses for 11 out of 26 years

So it seems in the overall scheme of things, the STI does tend to rise in January. And in the years the STI posted gains in January, the average return was 5.39%. Pretty damn decent!

However, when you include all the flat/losing years, the overall average return is only 0.42%.

The reason for this? The STI suffered double-digit losses in 1995, 1998, 2000, and 2008 which pulled overall returns down. If you recall, we had Nick Leeson sending Barings Bank to oblivion and the Kobe earthquake in 1995, the Asian Financial Crisis in 1998, a prelude to the Dotcom Bubble in 2000, and Global Financial Crisis in 2008.

So what does this mean for investors like us?

Bottom line, the STI does tend to rise in January but the moment the bad news seems to be getting out of hand, it’s best that you get out!

In my next article, I’ll explore if the January Barometer also holds true for the STI. Stay tuned!

Adam Wong

Adam Wong is the editor-in-chief of The Fifth Person and author of the national bestseller Lucky Bastard! which made the Sunday Times Top 10 Bestseller's List in 2009 and Value Investing Made Easy which made the Kinokuniya Business Bestseller's List in 2013. In 2010, he appeared on U.S. national television on the morning show The Balancing Act. An avid investor himself, Adam shares his personal thoughts and opinions as he journals his investing journey online.


  1. Yes, but also bear in mind that the stock market tends to rise on average. Your data also shows that if you invested in the the same amount in an index fund every month for 25 years you’d be very unlucky not to come out ahead.

    In fact you’d probably do better than most people who try and pick stocks and/or time the market.

    Don’t get me wrong, I wholeheartedly agree with the Fifth Person’s value investing ideas on how to select shares, and also on how to choose an entry point (a valuation with a margin of safety). It’s just that (based on my own experience) for many people passive investing in index tracking funds is a great approach because it requires less time and has lower costs.

    1. Hi Jonathan,

      Thanks for the comment!

      We’re totally big on passive investing and ETFs too! We’ve written a few articles on this and we believe it’s a great way for the average person to invest.

      Value stocks alone needn’t form an individual’s entire portfolio approach; other kinds of stocks and asset classes can/should be included as well for better overall diversification.

      For example, an investor can primarily invest in index ETFs along with some dividend stocks and REITs to build an additional passive income stream. This way, a passive investor can rely on the index for long-term capital growth and his dividend stocks and REITs for income 🙂

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