The harder the SPX falls in early December, the harder it rallies at the end of the month
December started out anything but jolly for U.S. stocks, which have tumbled along with oil prices. While stocks and crude are on the mend this week, the
S&P 500 Index (SPX) remains roughly 1.7% lower month-to-date, having just
wrapped up its worst five-day stretch since August. But have no fear -- history suggests the S&P tends to turn its early December lumps of coal into big, shiny diamonds.
In fact, the SPX has enjoyed a positive second half of December (12/15 - 12/31) for eight straight years. The last time the SPX was down in the second half was in 2006, when it lost 0.62% in that two-week stretch, per Schaeffer's Senior Quantitative Analyst Rocky White.
The bullish end-of-month skew remains evident going back 50 years: the SPX has been positive in the first half of the month just 54% of the time, compared to 80% of the time during the second half of December. What's more, the index has averaged a first-half loss of 0.1%, compared to a second-half gain of 1.6%.
As alluded to earlier, it seems the harder the S&P falls in the first two weeks of the month, the harder it rallies in the last two weeks. The index has been down by 1% or more in the first half of December on 17 occasions during the past half-century. Following these instances, the SPX has come back with a vengeance, with a positive second-half finish 88% of the time, and an
average gain of 2.5%.
And if you're still not buckled up, just take a look at the
S&P's typical December path over the past 50 years:
