Stock investors feeling festive
with hopes of a 'Santa Claus rally'

Key takeaways:

• December has historically been one of the best months for the stock market, with the S&P 500 delivering monthly gains approximately 75% of the time since 1950.
• Seasonal tailwinds, resilient earnings, and supportive fundamentals should create a favorable environment for equities through the end of the year.

December 11, 2024 – Back in January, the outlook for stocks in 2024 was anything but optimistic. In many previews of the year ahead, Wall Street analysts had sounded ominous market alarms, such as the inverted yield curve, suggesting a recession was looming on the horizon. These warnings cast a shadow over expected corporate earnings growth and dampened investor expectations for stock performance.

Yet, with three and a half weeks left in the year, we can confidently say that 2024 has been a magnificent year for stock investors. Year-to-date through December 6, the S&P 500^® Index is up over 29% and has posted 56 record highs. After clearing the 5,000 mark for the first time in February, it took only 190 days (in late November) for the S&P 500 to close above the 6,000 level for the first time.

As the holiday season is already here, many stock market bulls are wondering if a 'Santa Claus rally' at year-end will deliver more gains to investors. For those who have stayed on the 'nice list'—meaning, continuing to invest in the market—they can count on strong momentum, technical metrics, and positive sentiment heading into December.

History is also on the bull market’s side; December has been one of the best months for the stock market, with the S&P 500 delivering monthly gains approximately 75% of the time since 1950. (See the accompanying chart.) That’s the highest percentage among all calendar-year months. December ranks as the second-best month for S&P 500 gains on average, with a monthly return of around 1.5%, surpassed only by November’s impressive average return of 1.8%.

Strong seasonal tailwinds, resilient corporate earnings, and a supportive fundamental backdrop should create a favorable environment for equities through the end of the year. However, it’s crucial for investors to remember that historical patterns—no matter how favorable—do not guarantee future outcomes. This fact highlights the importance of long-term investing in achieving financial goals.