Can you believe it? We’ve made it to the last month of the year! I don’t know about you all, but I’ll be pretty happy to wish 2022 goodbye as soon as possible. But the good news is that we continue to think the mid-October lows were the lows from the bear market, and continued good times could be coming. I’ll break down some positive signs tomorrow on the blog, but today I’ll show why there’s a chance Santa will come to town and bring some green with him this December.

First things first, December is historically known as one of the best months for investors, and this is true. Only once did the S&P 500 see December turn out to be the worst month of the year. That was in 2018 when the Fed made one rate hike too many, and investors weren’t very festive about things, sending December down a record 9.2%.

As the chart shows below, December is still up over the past ten years (so including that massive drop in 2018), and that is mainly because the past three years, this final month has gained 2.9%, 3.7%, and 4.4%, respectively. Looking further, it ranks as the third-best month since 1950, with only April and November better. In fact, until 2018, this month was historically the best. Lastly, in a midterm year, October is the best month, November is the second best, and December is the third best.

Some other things to know:

  • When stocks are down for the year heading into this month, December has been higher eight of the past nine times.
  • Stocks have finished green in December for the past three years, the longest such streak since six in a row from 2008 to 2013.
  • Midterm years have been worse lately, down a record 9.1% last time (in 2018) but also down in 2014. At least we’ve never seen stocks down three Decembers in a row during midterm years.
  • When stocks are up in both October and November (which could be the case this year as long as we don’t see a massive drop today), the S&P 500 doesn’t do quite as well in December, up 0.75% on average compared with the average December return of 1.54%, suggesting the prior months could be taking some of December’s historical strength.
  • Lastly, only once in history has December been the worst month of the year for the S&P 500. That was in 2018 when the Fed hiked rates one more time, and it caused massive selling, but this month is usually quite calm, and big drops are rare.

The bottom line is that with inflation likely peaking, the U.S. dollar weakening, positive seasonals, a potentially more dovish Fed, investors still extremely bearishly positioned (bullish from a contrarian point of view), broadening overall market participation, a stronger than expected consumer, and crude oil back to near flat for the year, there are many former headwinds, which have now become potential tailwinds. When all is said and done with 2022, we wouldn’t be surprised to see this year end higher than where it is today.

And please forgive me if you notice any typos; I wrote this while watching Team USA win a thrilling match against Iran. Go USA!

 

facebook twitter linkedin mail print
Share Post: facebook twitter linkedin mail print
Recent Posts
Blog

Carson Research’s Weekly Earnings Update

By: Brett Carson
“The Waiting” Tom Petty’s 1981 classic “The Waiting” was inspired by a Janus Joplin quote; “I love being onstage.  Everything else is just waiting.”  We feel the same about …
Blog

Laura Garfield and Sharon Gottula: When Story Meets Finance

By: Jamie Hopkins
In this episode of Framework, Laura Garfield and Sharon Gottula explore the serendipitous story of how they transitioned from making videos for the wine industry to financial services – …
Blog

The Economy Had a Strong Close to ’22…Now What?

By: Sonu Varghese
The latest GDP growth numbers for Q4 2022 came in at 2.9% quarter-over-quarter (annualized rate), which was higher than expectations for a 2.6% reading. This is only slightly below …
Blog

Understanding Which Financial Advisor Software Your Firm Needs

By: Anthony Duran
The financial advisor software landscape continues to evolve, with new digital tools hitting the market each month. With the right tech stack, you can deliver a better client experience, …
1 2 3 149