3 Reasons to Buy Stocks in January 2025

A new year offers a new start…

…and big opportunities.

Here are 3 reasons to buy stocks in January 2025.

The S&P 500 just put up a back-to-back crowd-stunning performance with 2023 jumping 24% and 2024 vaulting 23%.

Being long equities has been the winning ticket.

If you’re considering cashing out simply because this rally is getting long in the tooth, hold that thought.

The evidence suggests more upside is ahead.

Today, we’ll kick off 2025 with 3 data-driven reasons to own equities this month.

But first, let’s review the Big Money landscape. Our most popular indicator has fallen to levels last seen since the Summer.

Market Breadth is Weak Coming into January

A big year for stocks ended on a weak breadth note. You can see this with the Big Money Index (BMI) falling to 52%.

As a reminder, when the BMI retreats it’s signaling that more stocks are getting sold relative to those getting bought.

This barometer reveals how a handful of mega-caps are holding up the large-cap index. Most pundits will highlight how weakness under the surface is a worrisome trend.

Just don’t buy into it. History proves otherwise.

Since 1928, narrow market leadership is bullish not bearish. The lowest quartile breadth readings signal a 15.4% average 12-month gain for the S&P 500.

This should make intuitive sense. Value hunters swoop in when the for-sale signs appear on equity lawns.

But this isn’t the only datapoint flashing a bullish signal.

History offers a trifecta of reasons to buy stocks soon.

3 Reasons to Buy Stocks in January 2025

It’s always good to look backwards for clues. Given we just experienced an extraordinary 20%+ year for stocks, what does history suggest is ahead?

More gains.

Reason number 1 to buy stocks in January 2025 boils down to the fact that equities climb after strong momentum years.

Since 1925, when the S&P 500 gains 20% or more, the average 1 year return is 8.4%. This fits in-line with our 2025 outlook to look outside of large-caps to unlock big gains.

A new year also kicks off a new presidential election cycle year. It’s not a bearish signal.

Reason number 2 to own stocks in January is the fact that year 1 of a new presidential election cycle is positive.

Since 1925, the first year of a presidential election cycle amounts to a 7.1% average gain for the S&P 500.

These modest gains trail pre-election year gains of 14.7% and election year gains of 8.1%:

Up to this point, big momentum isn’t a reason to sell stocks. Year 1 of a presidential election cycle isn’t either.

Is there further evidence to be constructive on stocks?

YES.

Just be choosy.

Early in the year, money managers often bet on outlier stocks. These are the companies they believe will have exceptional earnings growth in the year ahead.

Reason number 3 to bet on specific equities in January comes down to the tendency for all-star stocks to get accumulated early in the year.

Our Top 20 report is the who’s who of stocks. Best of breed companies bought by institutions are found in this weekly lineup.

A great example of the January outlier effect is NVIDIA (NVDA) from 2024. Below you can see the repeated occurrences of institutional sponsorship.

Each blue line indicates when NVDA was a Top 20 stock:

What was the reason for the sudden quiet excitement for NVIDIA? Earnings growth.

In January 2024, the estimated net income for fiscal year Jan’ 2025 stood at $47.85 billion. Fast forward to today and estimates peg net income at $70 billion!

An old Wall Street adage states that stocks follow earnings. When it comes to outliers, earnings follow stocks.

Since it’s a new year let’s showcase another early-in-the-year winner. In 2024, out of nowhere semiconductor firm Broadcom (AVGO) began rallying as unusual trading volumes spiked.

It wasn’t on the Top 20 in January, but it came soon after. What followed was a pattern we see all too often: The stairway to heaven.

That’s when a stock continually presses higher due to institutional demand.

Broadcom is the poster child of an outlier stock:

There will be big winning stocks in 2025.

You’ll just need a map to find them!

Let’s wrap up.

Here’s the bottom line: Equities surged the last 2 years. Weak market breadth is a bullish signal, not the other way around.

Add to it that after a 20%+ surge in the S&P 500, stocks gain an average of 8.4% the following year. Even more, year 1 of an election cycle year boasts average full year gains of 7.1%.

If that isn’t enticing you to jump in with both hands, consider the fact that institutions tend to make big wagers early in the calendar year as they put fresh capital to work.

This last piece of evidence is where MAPsignals shines.

Institutional footprints reveal tomorrow’s leading stocks today.

Prices follow the Big Money.

What are you waiting for?

If you’re a serious investor, money manager, or RIA – start the new year off right with cutting edge evidence-based research. A MAP PRO subscription will help you spot outlier winning stocks loved by money managers.