Halie O’Shea, Vice President & Director of Research
hoshea@haverfordquality.com

Is the “January Effect” real?

According to market lore, January is one of the strongest months of the year, propelled by portfolio rebalancing, tax loss unwinds, and optimism about the year ahead. As this January comes to a close, investors are contending with uncertainty around policy, such as tariffs, and headlines about Chinese AI company DeepSeek, which pressured technology stocks Monday and sent indexes lower.  However, when we look at the year ahead, we still see plenty of reasons to be optimistic of the outlook for equities.

Reasons for Optimism

We were encouraged last week when President Trump announced a major U.S. initiative on his second full day in office to support domestic AI infrastructure. The initiative known as Stargate is a partnership with Oracle, Softbank, and Open AI to invest $500 billion over the next four years to develop ten massive data centers. Stargate signals the president’s priorities around pro-business policies and supporting U.S. technology and innovation.

Recent economic data also reinforces our constructive view for U.S. equities. Ongoing healthy employment trends and better PMI Manufacturing data last week support our outlook for healthy economic and corporate earnings growth.

We expect monetary policy to support economic growth. The Federal Reserve remains on a path for further easing, although at a gradual pace. At this week’s FOMC meeting, the Federal Reserve is expected to maintain current interest rates. Chairman Jay Powell’s commentary will be closely watched for insights into the Fed’s future actions amidst the new administration’s policies. Powell is likely to emphasize a “wait and see” approach, considering the uncertainties around tariffs, immigration, and their potential impact on economic growth and inflation.

While policy will take time to play out, we maintain our commitment to identifying and investing in high quality, dividend paying companies. And as proud Philadelphians and Eagles fans, we see plenty of reasons for optimism.