The stock market just hit a rare trifecta of bullish indicators that suggests massive upside this year

  • The stock market just confirmed a rare trifecta of bullish indicators that suggests big upside in 2023.
  • The trifecta included a Santa Claus rally, positive returns in the first five trading days of the year, and a positive January.
  • On other occasions when the bullish trifecta occurred after a bear market, stocks were higher 100% of the time in the following year.

The stock market is poised for massive upside in 2023 after a rare trifecta of bullish indicators was completed in January.

That’s according to research that was pioneered by Jeff Hirsch of the Stock Trader’s Almanac, and was recently highlighted by a number of Wall Street firms, including Carson Group’s Ryan Detrick and Ned Davis Research.

The trifecta occurs when stocks generate a positive return over three different time periods. Those periods include the Santa Claus rally (a seven-day stretch that begins at the end of December and spills over into January), the first five trading days of January, and the entire month of January.

This year, the S&P 500 generated a 0.8% return during the Santa Claus rally, a 1.4% rally during the first five trading days of the year, and a 6.3% gain for the month of January.

Since 1950, the S&P 500 has completed the bullish trifecta 31 times, and 28 of those times the stock market went on to print positive returns for the rest of the year. That’s a win ratio of 90%. On top of that, the upside is strong after the trifecta is completed, with an average gain of about 18%.

However, an even rarer occurrence is for the market to nail the trifecta following a year of negative returns. That just happened, with 2022 being a brutal year for investors in which the S&P 500 fell nearly 20%. 

In the nine years in which a bullish trifecta was completed after a deeply negative year, the S&P 500 delivered an average return of 27% with a 100% win ratio. This scenario most recently happened in 2019 and also 2012, with the S&P 500 finishing those years up 29% and 13%, respectively.

“Hitting the seasonal trifecta the year after a bear market implies a change in the intermediate-term trend in the market, a transition that our indicators have been picking up recently,” Ned Davis Research said in a note on Monday.

Hirsch himself said of this year’s trifecta: “You should be bullish for this year. The market is probably going to go up significantly higher, so look for good opportunities in the broad market and in individual sectors and stocks.”