Stocks are close to flashing an ultra-rare indicator that’s led to a strong year of returns 100% of the time

• Stocks are flashing an ultra-rare signal that has historically led to strong returns, CFRA Research said.

• Stocks have only had a positive January in an election year 11% of the time, the firm said.

• Once that milestone is hit, the market has risen 100% of the time with an average gain of 15.6%.

The stock market is flashing an ultra-rare bullish signal with a 100% success rate, according to CFRA Research.

The investment research firm pointed to the positive January for stocks, with the S&P 500 gaining 3.2% since the start of the year.

In an election year, that’s actually a very rare, very bullish signal for stocks, CFRA chief investment strategist Sam Stovall said. Election years have only started with a gain in the first month 11% of the time. And once the S&P 500 have crossed that threshold, stocks ended up gaining an average 15.6% for the year, with gains posted 100% of the time, Stovall said.

A 15% gain would take the S&P 500 to around 5,629. That exceeds what most Wall Street strategists are expecting for the year, with Goldman Sachs, Bank of America, Deutsche Bank, and BMO seeing a 10% or smaller gain for stocks in 2024.

Some of the market’s hottest sectors could see even bigger returns, according to the positive January indicator. Since 1990, a positive January for stocks has led to the top three sectors in the S&P 500 to return an average 21% for the year, outperforming the overall market 84% of the time, Stovall added.

That implies a more than 20% return for communication services, information technology, and financial stocks, which currently make up the three strongest sectors of the market, according to a CFRA analysis of Dow Jones data.

Those indicators aren’t “gospel,” Stovall warned. Still, the firm saw a positive year coming for stocks, pointing to strong economic and investing conditions. Those include expectations of…