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Writer's pictureBill Shelmon Jr

Will Santa Claus Be Naughty or Nice?: Checkout the S&P 500 Index ~ December Performance After a Stellar Year

Wow! what a year 2024 has been so far for investing in financial markets.  To have another big market return following the strong returns in 2023 is truly amazing.  As an investor, understanding the historical performance of the S&P 500 Index can provide valuable insights into market trends and help you make better wealth-building decisions. One interesting pattern to explore is how the S&P 500 performs in December after achieving a 20% or more return from January through November of the same year.


Historical Context

The S&P 500 Index, comprising 500 of the largest publicly traded companies in the U.S., is a key benchmark for the overall health of the stock market. Historically, the index has shown a tendency to perform well in December, often referred to as the "Santa Claus Rally." This phenomenon is characterized by a surge in stock prices during the last week of December and the first two trading days of January.


December Performance After a Strong Year

When the S&P 500 has already achieved a 20% or more return from January through November, the performance in December tends to be positive. Several factors may contribute to this phenomenon:

  1. Investor Optimism: A strong performance throughout the year boosts investor confidence, leading to increased buying activity in December.

  2. Year-End Rebalancing: Many investors often use December to rebalance their portfolios at the end of the year, which can drive up stock prices.

  3. Holiday Spending: Increased consumer spending during the holiday season can positively impact the earnings of companies within the 500 S&P index.


Historical Data

Looking at historical data, we can see that in years where the S&P 500 achieved a 20% or more return by the end of November, December often continued the positive trend. For example (see Figure 1 below from Yahoo! Finance), in 2003, 2009, 2013, and 2019, the S&P 500 had a more than 20% return by November, and December saw an additional gain. Similarly, in 2021, the S&P 500 index had a return of 26.89% by November, with December contributing further gains.  What will happen in 2024 remains to be seen; but the historical outlook is positive.


Figure 1

Conclusion

While past performance is not indicative of future results, the historical trend suggests that the S&P 500 tends to perform well in December after a strong year. As an investor, it's essential to consider these patterns while also staying informed about current market conditions and economic factors.

Investing in the stock market involves risks, and it's crucial to maintain a diversified portfolio and consult with financial advisors, as needed, to make well-informed decisions. Happy investing!


As always, Paycheck to Wealth is your trusted Investment Advisor to help you navigate the challenges of the financial markets.  Reach out to us to get assistance to ensure that you have a joyous New Year and beyond! Please click here for assistance.

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