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All we are saying is give Dec(ember) a chance

Jay Kaeppel
2021-12-03
November ended badly for stocks, and December initially picked up where November left off. But stock market performance during December has historically been favorable. This is especially true if we compare the performance during post-election year December to the average performance of all months.

Key Points

  • December 2021 is off to a rough start - hopefully it is setting the stage for a rally later this month
  • December has historically been one of the best-performing months for stocks
  • December of Post-Election years have seen particularly favorable stock market action

Establishing the baseline

For testing, we will use the monthly closing price of the Dow Jones Industrial Average from 12/31/1900 through 11/30/2021.

The table below displays a monthly performance summary for all 1,451 months included in the test period.

Dow performance during December of Post-Election Years

We look at December 1901, 1905, 1909, etc. The chart below displays the growth of $1 invested in the Dow only during December of each post-election year starting in 1901.

The chart below displays the performance of December of each post-election year since 1901.

The table below displays a summary of monthly performance for all 30 post-election Decembers since 1901 compared to the baseline results for all months starting in 1901.

What the research tells us…

  • December of the post-election year has a solid history
  • As long as major market averages hold above their longer-term moving average, investors may do well to give the bullish case the benefit of the doubt as December 2021 unfolds

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Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

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