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What Is the January Effect?

By Sam Swenson, CFA, CPA – Updated Oct 12, 2025 at 10:13PM

Key Points

  • January Effect causes small-cap stocks to outperform largely due to Dec tax-loss selling.
  • Recent studies show January Effect's impact fading likely due to more tax-sheltered accounts.
  • Investors advised to maintain long-term strategies over trying to exploit this shrinking effect.

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