The belief that stock prices go up in January due to seasonal buying. This stems from the theory that investors sell during the month of December for tax purposes. After the mandatory waiting period, investors jump back in, driving prices up.
At the end of the year, so goes the thinking, investors are looking to offset capital gains, thus causing a drop in markets. Another factor is that professional money managers are seeking to lock in their returns for the year, thus adding another layer of selling.
A final piece is the idea that retail investors use individual year-end bonuses from their employment to purchase securities.
While an observable characteristic of markets in the past, there is no validation that this theory emerges in practice these days.
