Welcome To The Strongest Month Of The Year For Equities Historically

The month of November is in the books. We came into the month with the longest Dow losing streak in 35 years and many concerns over the U.S. presidential election. In the end, the fears didn’t materialize and equities had a big move higher.

Here is a summary of what happened last month:

• November was a great month for equities, as the S&P 500 gained 3.4%—its best monthly gain since a 6.6% gain in March. It was the best return in November since a 5.7% bounce in 2009.
• As good as the month was for equities, it was that bad for bonds as rates spiked. The Barclays Global Aggregate Total Return Index was down 4% for the worst month on record going back to 1990.
• The S&P 500 went the entire month without a 1% drop, only the third time that has happened the past 20 years during November.
• Small caps had a huge month, as the Russell 2000gained 11.0% for the largest monthly gain since a 15.0% jump in October 2011.
• During the month, the Russell 2000 (RUT) gained 15 consecutive days for only the fifth time since 1979, but the record of 21 straight green closes from 1988 remains safe.
• Turning to sectors*, financials gained 14.0%, for their best monthly gain since a 14.3% advance in October 2011. Industrials, energy, and materials all led as well. Utilities and real estate lagged as higher rates lowered demand for higher yielding assets. Consumer staples also lagged, as money rotated away from more defensive sectors.
• All four days of Thanksgiving week were green, something that interestingly has now happened in three consecutive election years.

December is known for many things, but from a financial point of view the best might be it has been a historically strong month for stocks. Per Ryan Detrick, Senior Market Strategist, “December is the feel-good time of the year and Santa tends to come for equities as well, as no month is higher more often or up more on average. Not to mention the Dow has been lower each of the past two Decembers, and since 1896, it has never been lower three years in a row.”

Here are some points to remember:

• December has been historically one of the strongest months for equities. Going back to 1950**, the S&P 500 has averaged a gain of 1.6% and been higher 76% of the time; both are the best out of all 12 months.
• When the S&P 500 has been up for the year heading into December, the average return in the month jumped to 2%. When the year has been down heading into the month, the average return dropped to 0.8%.
• The catch is the S&P 500 has been lower in December during the past two years for only the sixth time in history (going back to 1928). It has never been lower for three consecutive years.
• It is rare to see a large pullback during this month as well, as since 1950, the average return when the month is negative has been only -2.1%, the smallest loss out of all 12 months.
• Incredibly, since 1950, only once has the S&P 500 closed the month of December beneath the low close from the month of November.
• Going back to 1950, the S&P 500 has never had its weakest month of the year during of December. In fact, it has only had the 11th and 10th worst months of the year seven times.
• The last time December was the worst month of the year for the Dow was in 1916, when it dropped more than 10% during World War I.

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IMPORTANT DISCLOSURES

Past performance is no guarantee of future results.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation may not develop as predicted.

*As measured by S&P 500 sub-indexes.

** Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1928 incorporates the performance of predecessor index, the S&P 90.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not ensure against market risk.

Because of their narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS (agency and non-agency).

The Dow Jones Industrial Average Index is comprised of U.S.-listed stocks of companies that produce other (non-transportation and nonutility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocks’ prices.

The Russell 2000 Index measures the performance of the small cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index.

This research material has been prepared by LPL Financial LLC.

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