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Sound Advice: October 9, 2024

The stock market usually rises during the December quarter 

The stock market often experiences positive performance during the fourth quarter, which includes December, in a phenomenon known as the "Santa Claus rally." But it's important to note that this is not a guaranteed occurrence every year. Here are some key points about stock market performance in the December quarter:

Historical Trends

Historically, the fourth quarter has been the strongest for stock market returns. Since 1950, the S&P 500 has averaged a gain of about 4% during this period.

Factors Contributing to Q4 Strength

Several factors can contribute to positive stock market performance in the fourth quarter:

  • Holiday Spending: Increased consumer spending during the holiday season can boost retail and consumer discretionary stocks.
  • Window Dressing: Fund managers may buy top-performing stocks to improve their year-end portfolio reports.
  • Tax-Loss Harvesting: Investors may sell losing positions for tax purposes and reinvest in other stocks.
  • Optimism: General optimism about the coming year can lead to increased buying.

The "Santa Claus Rally"

The term "Santa Claus rally" specifically refers to the last five trading days of December and the first two of January. This period has historically shown even stronger performance than the broader fourth quarter.

Variability

Although the fourth quarter tends to be positive on average, it's crucial to remember that market performance can vary significantly from year to year. Economic conditions, geopolitical events, and other factors can impact stock market performance regardless of seasonal trends.

Recent Performance

In recent years, fourth-quarter performance has been mixed. For example, in 2022, the S&P 500 gained about 7.1% in the fourth quarter, but in 2018, it declined by about 14%.

Yes, the stock market has historically shown a tendency to rise during the December quarter, but it's not a guaranteed outcome. Investors should always consider current market conditions and their individual financial goals when making investment decisions, rather than relying solely on seasonal trends.

 

N. Russell Wayne

Weston, CT  06883

 

203-895-8877

www.soundasset.blogspot.com

 

 

 

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