It's The Most Wonderful Time of the Year for Stock Traders

Stocks could be in for even bigger end-of-year gains following a monstrous 2017

Senior Quantitative Analyst
Dec 20, 2017 at 8:00 AM
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After this full week of trading, we'll be followed by two shortened weeks for Christmas and New Year’s. Below, I show how stocks have performed during these holiday weeks in the past. First, though, I point out how bullish the second half of this month usually is for the S&P 500 Index (SPX).

History Says to Buy Stocks Now

Below is a table comparing the first half of December to the second half of December over the past 50 years for the S&P 500. The first half, on average, is almost flat, with barely over 50% of the returns positive. The December gains are typically had in the second half of the month. From Dec. 15 through the end of the year, the SPX averages a gain of 1.59%, and is positive 80% of the time. 

spx stocks average december returns

The black line on the chart below shows the typical path of the S&P 500 in the month of December over the past 50 years. You can see the outperformance in the second half that was pointed out in the table above. This year, stocks got off to a slow start in December, but have taken off -- and now the index is up about 1.4% month-to-date.

spx average december returns

More broadly, 2017 has been a wonder year for stocks, with the S&P 500 up nearly 20% so far. I wondered if the latter half of the month was as good if big gains had already been made on the year. The table below shows a solid year does not eat into the late returns. In fact, when the S&P 500 is up at least 15% heading into the final two weeks, it averages a 2.21% gain rest of year. That outperforms times when stocks have not done as well year-to-date heading into the last two weeks.

spx second half december returns

Christmas and New Year's Have Been Kind to Bulls

Finally, here’s one more reason to be bullish over the next couple of weeks. Next week is Christmas and the week after that is New Year's. The table below summarizes how these weeks have performed compared to other weeks over the past 50 years. The holiday weeks each average around a 0.60% gain and are positive over 60% of the time. Compare that to typical weeks where the S&P 500 averages a gain of just 0.14% and is positive 56% of the time. There seems to be some seasonality tailwinds over the next couple of weeks.

spx returns during christmas and new years weeks


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