A lot of market watchers are excited by the "January Barometer" or "January Indicator," which suggests that January's returns indicate the direction of stocks for the full year. The S&P 500 index was certainly up in January (although by just 1.37%).
But tech investors might not want to pop the champagne just yet, because there's another historical trend we've seen in January that has dire implications for tech stocks in 2026. It may already be starting to play out.
Image source: Getty Images.
Dow vs. Nasdaq
Very few investing rules have been true 100% of the time over the last 15 years. Whether it's the "January Barometer" (80% accurate over the past 15 years) or the "Santa Claus Rally" (27% accurate over the past 15 years), there are almost always exceptions.
But one rule that has held up for the past 15 years is this:
Every time the Dow Jones Industrial Average has underperformed the Nasdaq Composite Index by more than 0.25 percentage points in January, the Dow has gone on to underperform the tech-heavy Nasdaq for the year.
That's happened nine times over the past 15 years, with 100% accuracy. In fact, you'd have to go all the way back to January 2007 -- as the real estate bubble was inflating prior to the Great Recession -- to find an exception to this rule.
It makes sense: Tech stocks like those on the Nasdaq tend to grow faster than the mega-cap corporations that make up the Dow. But what about the years when the Dow outperformed the Nasdaq in January, like this year?
Image source: Getty Images.
The January omen
The Dow has outperformed the Nasdaq in January by more than 0.25% in five of the last 15 years -- 2011, 2013, 2016, 2022, and 2025. In three of those years (2011, 2016, and 2022), the Dow went on to outperform the Nasdaq for the year (by 6.7, 7.3, and 19.8 percentage points, respectively). In the other two years (2013 and 2025), the Nasdaq came back to overtake the Dow for the year (by 6.6 and 11.8 percentage points, respectively).
So, even though the Dow beating the Nasdaq in January has "only" portended Nasdaq underperformance 60% of the time, that's still a lot more than the 0% of the time it's happened when the Nasdaq outperformed the Dow in January. How worried should tech investors be?
Mixed signals
There are already some indications that tech stocks are on track to underperform this year.
The tech sector has seen some huge gains over the past few years. The Nasdaq rose 122.1% between 2023 and 2025, compared to just a 45% gain for the Dow. Valuations for some of the biggest tech stocks have been getting frothy, and they may be ripe for a pullback.
NASDAQINDEX: ^IXIC
Key Data Points
It's a pullback we may already be seeing. So far in February, the Nasdaq has dropped 4.1% while the Dow has only slid 0.8%. Big tech stocks like Nvidia and Oracle have pulled back by more than 9% since the start of the month. This could just be a "Banana Peel February" -- stocks have pulled back in February more often than not in recent years -- or it could be a more serious indicator of things to come.
Long-term tech investors shouldn't panic-sell, but history suggests they may want to take the opportunity to add some diversification to their tech-heavy portfolios.
