In the end, the S&P 500 Index lost 9.2% in the historically bullish month of December, for the worst-performing December since 1931. From continued trade worries to algorithmic and high frequency trading, from the global economic slowdown to the Federal Reserve (Fed) being too hawkish for the markets’ liking, pick a reason and Santa didn’t visit in 2018.
Or did he? The Santa Claus Rally everyone talks about isn’t really for the entire month of December–it’s only the last five trading days of the year and the first two trading days of the following year (December 24, 26, 27, 28, and 31 and January 2 and 3). This is also known as the “December Effect,” first noted by Yale Hirsh in his Stock Trader’s Almanac in 1972.
With a day to go, the S&P 500 is up an impressive 3.9% during this historically bullish seven-day period. Looking at all possible seven-day periods, this is actually the seven-day stretch most likely to be positive. Believe in Santa yet?
“In the rare instance that the market gets a lump of coal instead of a Santa Claus Rally, it usually means there could be weakness in January. In fact, the past five times Santa didn’t show, stocks dropped in January,” explained LPL Senior Market Strategist Ryan Detrick.
As the LPL Chart of the Day shows, over the past 20 years, five have received coal and sure enough, January closed lower every single time. With Santa showing up in 2018, could this be a sign of better times ahead for the bulls?
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
The Standard & Poor’s 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.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
For Public Use | Tracking # 1-807627 (Exp. 01/20)