Wall Street loves the prospect of a tax bill landing on the president’s desk this weekend. We’re within striking distance of Dow 25,000 as I write this.

I think the markets are going to continue to soar from here, allowing for the prospect of a small pullback when and if traders try and “sell the news” of the tax bill becoming law.

More gains ahead… but some gains will be bigger than others, thanks to the “January Effect” – a phenomenon distinct from the “Santa Claus rally,” but which is happening earlier and earlier every year.

I’ll tell you all about it – and name the asset that’s about to go ballistic because of the effect…

This Can Get You a Huge Single-Month Edge

You may have heard of the January Effect, where small-cap stocks have historically outperformed their large-cap brethren during the month of January.

This big outperformance by the small caps was very clear in the second half of the 20th century, with Hirsch and Hirsch reporting in the Stock Trader’s Almanac that small caps far outpaced big caps during January for 40 out of 43 years between 1953 and 1995.

During that time, small caps gave an absolute performance improvement that was staggering.

The Wall Street Journal reports a small-cap outperformance of 5.1% versus large caps during the decade of the 1970s.

Said another way, a $100,000 portfolio invested in small caps would return $5,100 more than one invested in only large caps during the month of January. That’s a huge single-month edge.

Since then, it seems like everyone has jumped on this bandwagon, and the edge provided by this seasonal tendency has steadily diminished down to only a 1% edge in the 1990s.

However, there is good news (that is coming up fast upon us) on the small-cap outperformance front.

The Gains Start in December These Days

The January Effect is still working… it’s just working a little earlier, that’s all.