Investors Love December, and For Good Reason
Joy to the World is one of those classic Christmas carols. Even if you can’t remember all the words, it’s got all the entrapments of a song you can easily hum along to. And it’s extremely popular. Over the remaining 20-plus days in December, you’ll probably hear it a thousand times on the radio or while being blasted over the loudspeakers at your local shopping mall.
The song was written in 1719 by English minister, and highly prolific hymn writer, Isacc Watts. Watts is credited with penning some 750 hymns during his life, with Joy to the World achieving the greatest notoriety. More than 200 years later, his song still remains standard fare among church choirs and holiday revelers.
Now, for you non-Christmas folk, the holiday version of Joy to the World is not to be confused with the 1971 hit song of the same name by American rock group Three Dog Night. However, you’ve got to admit the Three Dog Night version is still a pretty good song to rock out to. But this is not an article on the history of Christmas carols or of Isaac Watts. Instead, it’s to highlight the exceptional, dare I say joyous, historical performance of the U.S. stock market in the month of December.
The S&P 500 tracks the performance of the 500 largest U.S. corporations and is often viewed as the bellwether index for the U.S. stock market. Since 1928, the benchmark S&P 500 has generated a positive return for the month of December 73% of the time – the highest of all months. On average, the S&P 500 has gained 1.25% in December. Its worst performing month is September, which has averaged a loss of 1.13% over the past 97 years. If you include the Thanksgiving holiday, the returns are even more impressive. Since 1928, from Thanksgiving through Dec. 31, the S&P 500 has gained 1.46%.
Over the past decade, the S&P 500 has reported a gain in December in seven of the last 10 years with an average gain of around 1.45%. Last year, the S&P 500 posted a hefty 4.42% gain in December but reported a dismal 5.9% loss in December 2022. The worst performing December since 1928 was in 2018 when the S&P 500 declined 9.18%. The best performing December was in 1991 when investors celebrated a massive 11.2% return.
There’s no official rationale to the historically strong performance the S&P 500 typically yields in December. Perhaps it’s the general optimism that surrounds the holiday season. Others contend it’s a short-term conviction on the retail holiday shopping season, which is the 61 calendar days in November and December. The holiday shopping season is by far the biggest season for retailers. As consumer spending accounts for more than two-thirds of all U.S. economic growth, one could argue investors are hopeful the retail holiday shopping season could provide a spark to the economy and future gains in the stock market.
But what does history indicate about the first few months of 2025? The results are a bit mixed but certainly don’t match the gusto of historic December returns. Since 1928, the average monthly return for the S&P 500 in January is 1.17% followed by February (-0.9%) and March (0.6%).
So far this year, the S&P 500 has gained more than 27%, excluding any dividends. That’s more than three times the historical average annual gain of around 8%. As a side note, when you add-in dividends to the calculation, the average annual return jumps to 10-11%.
No one knows for sure exactly what lies ahead for investors in 2025. Each year is a clean slate that starts anew. But I wish you the greatest of success, and fortune, in the upcoming year.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Quad Cities Investment Group and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Quad Cities Investment Group unless a client service agreement is in place.
