santa-claus-rally

Don’t Hang Your Stockings Just Yet, December Rallies Aren’t What You Think…

The investing internets are ablaze with prognostications of a December rally for the markets. The Street.com is All-In, saying, “It’s in the Cards.”  And it’s easy enough to understand why people are hanging their stockings on the seasonality trend…

From Bespoke:

The month of December is historically one of the strongest months for positive equity returns, but in a year where a larger than average percentage of investors are underperforming the market, managers will be looking for alpha wherever they can.  With that in mind, we calculated the average performance of major S&P 500 groups going back to 1990.

Going back to 1990, the S&P 500 has averaged a December return of 2.02% with positive returns 81% of the time…

Going even further back (to the 1930s); Just look at this chart, it’s impressive…

But before you frantically call your Financial Adviser (or is it Financial Advisor? with an ‘O’, I always get so confused), loading up the portfolio in time for Christmas, maybe you should consider the great data sleuthing work from my friend, Michael Stokes, over at MarketSci:

Ed (a MarketSci reader) asked me whether this bullish seasonality was affected by the market’s performance in the preceding 11 months, Jan – Nov (which would make sense given “tax loss selling” and all that jazz). In short, yes it is….

And the charts don’t lie…

By my calculation we stand at about a -3.5% loss YTD, so we’re right on the cusp of the cutoff point. In any case, the important takeaway is that the much touted bullish December seasonality might not be so strong this year.

So, I hope I’m not being a grinch; I just want to make sure you don’t get too drunk on the seasonality eggnog.

Read More: 

December (Not So) Super Duper Bullish

3 thoughts on “Don’t Hang Your Stockings Just Yet, December Rallies Aren’t What You Think…

  1. Pingback: Hot Links: And the Market Shrugs | The Reformed Broker

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