The market’s record year may have more headroom, with sentiment supported by recent outperformance and historical trends.
Stocks have hit record highs following President-elect Donald Trump’s victory earlier this month, while Wall Street remains optimistic about the new administration’s economic agenda despite looming tariff risks.
“Rate threats may cause near-term market volatility, but the fundamental backdrop remains supportive,” Mark Haefele of UBS Global Wealth Management wrote in a note to clients on Wednesday.
This year, the S&P 500 (^GSPC) has posted more than 50 all-time closing highs, while the Dow Jones Industrial Average (^DJI) and Nasdaq 100 (^NDX) aren’t far behind.
Looking ahead, strategists suggest the market’s bull year could end on a positive note.
“Right now you can’t deny that everything looks positive,” Michele Schneider, chief strategist at MargetGuage.com, told Yahoo Finance’s Morning Brief, adding that investors should “stick to the momentum and the trend.”
If we use history as a guide, there is a good chance that this trend will continue to develop. According to CFRA’s Sam Stovall, December is the most consistent month of gains for the S&P 500, with the greatest frequency of advances (batting average). It also has the lowest volatility: almost 40% below the average of other months since World War II.
During the month, the S&P MidCap 400 and SmallCap 600 indexes outperformed other parts of the market, closely followed by the Utilities (XLU), Industrials (XLI), Materials (XLB) and Financials (XLF) sectors ).
What makes this year special are the elections that contribute to the bullish sentiment. December historically ranks as the second-best month of the year for the S&P 500 during election years, with an average return of 1.3% since 1950, according to analysis by Ryan Detrick of Carson Group.
His analysis also found that strong performance since the start of the year often increases the likelihood that investors will chase the market through the end of the year. Of the past ten times that the S&P December rose more than 20%, the month of December recorded an average gain of 2.4%.
Looking further ahead, the potential for a Sinterklaas rally – i.e. when shares rise in the last five trading days of the year plus the first two trading days of the new year – could further boost returns.
Jeff Hirsch, editor-in-chief of Stock Trader’s Almanac, who explains that Thanksgiving kicks off a series of solid bullish seasonal patterns for the market, recently wrote that he “combined these seasonal events into a single trade: Buy the Tuesday before Thanksgiving and hold until the 2nd.” trading day of the new year. Since 1950, the S&P 500 has risen 79.73% of the time, from the Tuesday before Thanksgiving to the second trading day of the year, with an average gain of 2.58%.”
