A Look At December Seasonal Tendencies

Dec. 04, 2018 2:20 PM ETFDX, UPS1 Comment
Clif Droke profile picture
Clif Droke
4.48K Followers

Summary

  • December is the most historically bullish month for the S&P 500 Index.
  • Fundamental and technical factors favor a strong December for stocks.
  • Leading transportation stock indicator also supportive for strong month.

After experiencing one of the stormiest autumns of recent years, the storm clouds have lifted and stocks are poised to enjoy a productive December. In today’s report, we’ll discuss the reasons for this optimistic outlook as I explain why investors should expect the recent market recovery to accelerate in the weeks ahead.

Lately I’ve expressed the view that December should be constructive for stocks based on historical seasonal tendencies. Seasonal patterns alone aren’t strong enough to guarantee a strong performance for the stock market in any given month. However, when corporate fundamentals are positive and there is at least some measure of forward momentum, a bullish seasonal tendency is more likely to manifest itself. This is especially true for the last month of the year when several important factors converge to make it easier for stock prices to rise. With that in mind, let’s take a closer look at the historical pattern for the month ahead.

As it turns out, the month of December is one of the best months of the year for the S&P 500 and the Dow, with gains averaging 1.7 for the Dow and 1.6% for the S&P between 1950 and 2017. December has also been a good month for the Nasdaq and Russell 2000 indices. According to Jeffrey Hirsch of Stock Trader’s Almanac:

Rarely does the market fall precipitously in December. When it does it is usually a turning point in the market – near a top or bottom.”

In most years the stock market has a pronounced bullish bias in the final two weeks of the year as fund managers prune their portfolios in a final effort to improve their year-end statements. There’s an old bromide that goes: “Bears may come to call if Santa doesn’t come to Broad and Wall.” A failure of the market to

This article was written by

Clif Droke profile picture
4.48K Followers
Clif Droke is an equity research analyst and writer for Cabot Wealth Network. He has covered equities and commodities, specializing in gold, since 1997 and is the editor of the Cabot SX Gold & Metals Advisor.

Disclosure: I am/we are long XLP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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