Michael Jamison, Portfolio Manager
December 17, 2020
Investors marched into December guns a-blazing and ready to buy stocks after closing out a record setting November. The Dow rallied 11.8% in November, posting its best one-month performance since January 1987. The S&P 500 and Nasdaq Composite rose 10.8% and 11.8%, respectively, for their strongest monthly advances since April. As we head into the holiday apex, we are optimistic that the positive investor sentiment will continue to spread cheer into 2021.
According to CFRA data, since WWII there have been 36 years in which the S&P 500 recorded an 11-month rise of 10% or more. In December of these years, the S&P 500 climbed in price 75% of the time. The same holds true for the Dow trading pattern as well. Whenever the S&P 500 was up 10%-plus year-to-date through November, the DJIA was up an average of 1.8% in December, rising 78% of the time.
The following graph published by Bank of America further builds upon the case that this December may be one to remember. As illustrated below, the S&P 500 has risen more often in the final month of the year than in any other month since 1928. December’s figure of 73.9% surpasses the second-highest month, April, by 8.3 percentage points.
Although Covid-19 cases keep surging, we believe there are a number of reasons to remain hopeful as we close out the year. A potential return to normal social and economic activity based on an effective vaccine rollout, a dovish Fed, and more stimulus from Washington D.C. to name just a few. Happy Holidays!