A Year End Rally

From Thanksgiving to New Years Eve is typically one of the strongest market periods of the year.

Nobody really knows exactly why markets tend to perform better during this time. The running theory is that mutual funds are buying back into the market after taking tax losses in September and October, year-end bonuses are flowing into brokerage accounts and 401(k)s, and Wall Street investors are taking their Christmas vacations.

For you reading this email, I wanted to run those numbers so you know what is possible this year.

Here are my findings:

1. Regardless of how the S&P 500 performed in the year leading up to this season, the average performance during this period is greater than 1%, though it tends to be stronger in years where the market has performed well.
2. The S&P 500 is up during this time of year approximately 70% of the time.
3. When the market rises during this period, the average gain is 3.54%.
4. Interestingly, the best years for seasonal gains often followed the worst-performing years (e.g., 2008, 2011, 1970, 1971).

While I can’t—and won’t—guarantee anything for this season, the data suggests there’s a lot to be optimistic about.

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