My wife put Christmas lights on our house in mid-October. Last night, she hosted her annual “Elf Movie Night,” during which we ate movie-themed snacks for dinner and played Elf bingo using movie quotes and M&Ms as tokens. I don’t know anyone who gets more excited about Christmas than my wife, except maybe seasoned investors.
Investors know that December is historically a great month for stocks, but this year’s blowout November might have stolen some of the Santa Claus Rally’s thunder. The election-fueled November rally delivered an impressive 5.7% return for stocks, far outpacing the long-term average return of 1.8%. Most of the rallies took place after the presidential election and continue to show positive momentum.
Looking ahead to December, that positive momentum could continue for stocks, especially since December has historically been a good month for investors. Those strong returns often come late in the month, which is why it’s called the “Santa Claus Rally,” because the final few days of December are generally the best. According to the Wall Street Journal, December is the second-best performing month since 1950, with a 1.6% average gain behind November, and has been positive 74% of the time since 1950.
Given that the rally has been named “Santa Claus Rally,” it’s not surprising that returns closer to Christmas are better than at the beginning of the month since 1950. Historically, stocks were flat in the first half of December and began to rally around the 11th trading day of the month, which would be December 16th this year. However, with this year’s stronger-than-normal November, it is anybody’s guess as to what will happen in this year’s closing days.
The market’s strong November will probably continue carrying stocks through year-end but could start running out of steam after the first of the year. I am maintaining a neutral stance on stocks but leaning more toward large growth over value or large-cap because of valuations. You should invest according to your risk profile.
The Baker Elf movie night was filled with Christmas music and overweighted towards sugar-filled treats. The only consolation is that my wife agreed to have shrimp cocktail instead of Elf Spaghetti, though she did put a jar of maple syrup next to it. Hopefully, the Santa Claus Rally will be as punctual as Elf movie night.
Have a blessed week!
Richard Baker
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results. All indices are unmanaged and may not be invested directly.
The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri