We have showed the charts below to clients in the past few weeks. There are plenty of things to worry about (stretched market, tapering etc), but these charts are worth bearing in mind for those looking to bet heavily against the market in the next few weeks. Their message is soothing for investors.
December is indeed a good month to be long the stock market especially in Decembers that follow strong annual returns. We have seen a couple of such analyses in the past few weeks and thought that we would chime in here. Our small study comprises monthly returns since 1950 on the S&P 500.
(click on charts for better viewing)
Based on this period’s returns, an investor can expect an average monthly return of 0.7%, a number that rises to 1.7% in December. However, when the market has performed strongly going into December (here +10%) which is obviously currently the case, the average December return rises to a full 2 %.
So despite the unmistakably parabolic rise of the S&P 500 the bulls, at least, have statistical evidence on their side for strong returns into the holiday period.