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Stock market’s record run sets stage for December gains, pros say
The market’s record year may have more room to run, with sentiment buoyed by recent outperformance and historical trends.
Stocks have notched all-time highs following President-elect Donald Trump’s victory earlier this month, as Wall Street remains optimistic over the incoming administration’s economic agenda despite looming tariff risks.
“Tariff threats may trigger near-term market volatility, but the fundamental backdrop remains supportive,” UBS Global Wealth Management’s Mark Haefele wrote in a note to clients on Wednesday.
This year, the S&P 500 (^GSPC) has notched more than 50 all-time closing highs, while the Dow Jones Industrial Average (^DJI) and Nasdaq 100 (^NDX) are not far behind.
Looking ahead, strategists suggest the market’s bull year could end on a positive note.
“At this point, you can’t deny that everything looks positive,” Michele Schneider, chief strategist for MargetGuage.com told me on Yahoo Finance’s Morning Brief, adding that investors should “stay with the momentum and stay with the trend.”
Using history as a guide, the odds are for that trend to be on the upswing. According to CFRA’s Sam Stovall, December is the S&P 500’s most consistent month of gains, with the greatest frequency of advances (batting average). It also has the lowest volatility — nearly 40% below the average for the other months since World War II.
During the month, the S&P MidCap 400 and SmallCap 600 indexes have outperformed other areas of the market, followed closely by the Utilities (XLU), Industrials (XLI), Materials (XLB), and Financials (XLF) sectors.
What sets this year apart is the election adding to the bullish sentiment. December historically ranks as the S&P 500’s second-best month of the year during election years, with an average return of 1.3% since 1950, according to analysis from Carson Group’s Ryan Detrick.
His analysis also found that strong year-to-date performance often increases the chances that investors will chase the market into year-end. Of the past 10 times the S&P entered December up more than 20%, the month of December recorded an average gain of 2.4%.
Looking further ahead, the potential for a Santa Claus rally — which is when stocks climb higher in the final five trading days of the year plus the first two trading days of the New Year — could further boost returns.
Stock Trader’s Almanac editor in chief Jeff Hirsch, who explains that Thanksgiving kicks off a run of solid bullish seasonal patterns for the market, recently wrote that he has “combined these seasonal occurrences into a single trade: Buy the Tuesday before Thanksgiving and hold until the 2nd trading day of the New Year. Since 1950, S&P 500 has been up 79.73% of the time from the Tuesday before Thanksgiving to the 2nd trading day of the year with an average gain of 2.58%.”
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And good times for Wall Street might not stop there.
While next year’s gains will likely be more muted, many of Wall Street’s top strategists are growing more optimistic. This past week, Deutsche Bank chief global strategist Binky Chadha set a 2025 year-end S&P 500 target of 7,000, matching Yardeni Research’s target for the most bullish calls tracked by Yahoo Finance.
Meanwhile, Barclays and RBC Capital Markets both published 2025 year-end targets of 6,600 for the S&P 500, and JPMorgan’s equity team has a year-end target of 6,500, up from 4,200 the past two years.
One of the key catalysts will be the Trump administration’s market-friendly policies, THL Partners co-CEO Scott Sperling recently told me.
“One of the things that we’re expecting with the new administration is a significant bump in the potential for growth in the overall economy and a reduction in the cost of doing business … the opportunity set for all business is probably greater with the new administration, given the issues that we’ve seen in the last four years,” he said.
While the future remains uncertain, the combination of historical performance, recent momentum, and optimism surrounding Trump’s economic policies suggests a favorable opportunity for investors to continue buying into the market.
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips on deals, mergers, activist situations, or anything else? Email seanasmith@yahooinc.com.
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