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Stocks Ready to Close Out Powerful 2020, Risks Loom in Jan.

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At the close of trading next Thursday, the bull market will be ready to run into 2021 but probably at a slower pace. January is the month that Wall Street tradition says sets the tone for the year so goes January, so goes the year, as the saying goes. This January could be challenging, with the spreading pandemic slowing the economy and the important Georgia Senate runoff elections on Jan. 5.

On Jan. 20, Joseph Biden will be sworn in as president. Its a market thats on endofyear auto pilot, said Sam Stovall, chief investment strategist at CFRA. In three of every four years, the market sees an endofyear Santa rally, but Stovall is also waiting to see trading in the first five days of January for signs of how the market could trade in 2021.

If the market is higher in the first five days, history shows the SP 500 has been up 82 of the time for the full year with an average 12.5 gain, he notes.

There are things we could worry about in January. If they were real worries, the market would be reacting already or treading water already, Stovall said. What spooks me is the market is setting itself up. Its a correction in search of a catalyst, and we dont know what the catalyst is just yet.

Some strategists expect a pullback early in the year, but the consensus is that the market ends 2021 higher. The average expectation for the SP 500 at year end 2021 is 4,056, according to a CNBC survey of strategists. Stovall said the market has gotten pricey, and there are signs of…

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