Here comes December, historically a pretty solid month for stocks, but now we have the Omicron variant wreaking havoc on markets. “What a difference a week makes. A week ago stocks were at all-time highs and the economy was strong. Now all we have are uncertainties and questions,” explained LPL Financial Chief Market Strategist Ryan Detrick. “As of now we’re optimistic that stocks will sidestep the new variant worries, but we recommend investors buckle up their seatbelts, as the end of 2021 could be a bumpy one.”
Here are six things to think about as we head into the jolliest month of them all.
First, historically, the S&P 500 Index has gained 1.5% on average in December, which is the third best month of the year with only April and November better. But as you can see here, over the past 10 years, December has been much weaker. Of course, much of this was due to a huge 9.2% drop in 2018 (which we’ll get to soon enough).
Second, some more good news is December has been up 74.3% of the time, more than any other month of the year.
Third, back to that massive drop in 2018. Only once in history was December the worst month of the year for the S&P 500 and it was indeed in 2018. Three times it was the second worst month of the year, in 1968, 1980, and 1996. The worst monthly return so far this year was a 4.8% drop in September.
Fourth, stocks usually don’t get moving until the second half of the month, right as the holiday good feel vibes start to come out.
Fifth, this year is in rare air, as all 11 months have made a new all-time high so far. Should the S&P 500 make new highs in December that would be a perfect 12 for 12, matching 2014 as the only years to complete this incredible feat.
Sixth, as we show in the LPL Chart of the Day, it turns out that when stocks are up more than 20% for the year heading into December (like 2021), the final month actually does better, up 1.7% versus 1.5%. Also, it has been higher eight of the past nine times the year was up more than 20% heading into the final month.
Lastly, for more of our views on December, Omicron, another four years for Powell, and more, please watch our latest LPL Market Signals podcast below or directly from our YouTube channel.
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