Stock Market's Record Run Sets Stage for December Gains, Pros Say

The stock market is experiencing a remarkable year, with all-time highs following the recent election. Analysts are optimistic about the potential for continued gains in December, driven by historical trends and strong market sentiment.

Key Takeaways

• The S&P 500 has achieved over 50 all-time closing highs this year.
• December is historically the S&P 500's most consistent month for gains.
• The potential for a Santa Claus rally could further enhance market performance.

Market Performance Overview

The stock market has been on a record run, buoyed by positive sentiment following President-elect Donald Trump’s victory. Despite concerns over potential tariff risks, analysts believe the fundamental backdrop remains supportive for continued growth.

As of November 29, the S&P 500 index closed at 6,032.38, reflecting a gain of 0.56%. The Dow Jones Industrial Average and Nasdaq 100 are also showing strong performance, contributing to a bullish outlook for the remainder of the year.

December's Historical Trends

December has consistently been a strong month for the S&P 500, with the following characteristics:

• Highest Frequency of Gains: Historically, December has the greatest frequency of advances, making it the most consistent month for gains since World War II.
• Low Volatility: The month typically experiences nearly 40% lower volatility compared to other months.

According to CFRA’s Sam Stovall, December is the second-best month for the S&P 500 during election years, averaging a return of 1.3% since 1950. This year, the strong year-to-date performance is likely to encourage investors to chase the market into year-end.

Sector Performance Insights

During December, certain sectors tend to outperform others. The S&P MidCap 400 and SmallCap 600 indexes have historically shown strong performance, followed by:

• Utilities (XLU)
• Industrials (XLI)
• Materials (XLB)
• Financials (XLF)

The Santa Claus Rally Potential

Looking ahead, the potential for a Santa Claus rally could further boost market returns. This phenomenon typically occurs during the final five trading days of the year and the first two trading days of the New Year. Stock Trader’s Almanac editor Jeff Hirsch notes that since 1950, the S&P 500 has been up 79.73% of the time during this period, with an average gain of 2.58%.

Conclusion

With a record year behind them and historical trends favoring December, investors are optimistic about the stock market's potential for continued gains. As analysts suggest, staying with the momentum and trend could yield positive results as the year comes to a close.

Sources

• Stock market's record run sets stage for December gains, pros say, Yahoo Finance.