Breaking Down SPX Performance in the Second Half of December

Plus, the best and worst SPX stocks to own in the latter part of December

Senior Quantitative Analyst
Dec 9, 2020 at 8:00 AM
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December has been one of the best months of the year for the S&P 500 Index (SPX). Don’t fear, however, if you haven’t bought your stocks yet this month. The gains in December have tended come in the second half of the month. Over the past 50 years, the SPX has averaged a slight loss in the first half, with barely 50% of the returns positive. In the second half of the month, the index has gained over 1.5% on average, with almost 80% of the returns positive. Below, I’ll break down these second half returns further to relate it to our current environment, and show which individual stocks have been the best and worst over the latter half of the month.

S&P_Last_50

Breaking Down the Latter Half of the Year

Here’s a chart showing the typical path of the S&P 500 in December. I show the last 50 years, 20 years, and the current year. The last 20 years have not been as bullish as the last 50, but the trend has been the same with the index at a loss in the middle of the month, before recovering to a respectable return by the end. As evident in the chart below, stocks have taken off within this time period in 2020, with the S&P 500 gaining way more than usual in the first week.

Typical December Path

I was curious if big gains early in the month depressed the historically big gains in the second half of the month. The table below shows what I found. After the 10 times, the SPX gained at least 2% in the first half of the month. The index went on to average an almost 2% return for the rest of the month, with 80% of the returns positive. A moderate gain in the first half was least bullish for the second half, but those are still good numbers for a half month. In short, big gains in early December should not put anyone off of stocks for the rest of the year.

S&P Second Half

So far in 2020, the S&P 500 is up 14.5% on the year. Again, whether stocks have been up or down, it doesn’t change the fact that the last half of December has been a bullish time. In fact, the S&P 500 has performed its best, as measured by average return, when the index was up 15% or more heading into the last two weeks of the year.

2_S&P Second Half

Stocks to Buy and Avoid 

Although the market has performed great in the last two weeks of the year, there are individual stocks that have done even better, as well as some that have performed worse. This first table shows the stocks that have been most likely to beat the S&P 500 over the last couple weeks of the year. Oil stocks look over-represented in this list including Valero (VLO) which has beaten the index nine of the past 10 years, averaging a gain of over 4% during the last two weeks of the year.

Last 10 years

Finally, these are the stocks which have been the least likely to beat the index in the last two weeks of the year.

Worst S&P

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