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Value Investor Daily #68
Year-End Rally?
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The S&P 500 is up 27% this year, and if it can cross the 30% mark, 2024 is on track to be one of the best years in decades.
To understand what might happen next, we looked at how the market has performed historically from Thanksgiving to New Year’s.
While no one can predict the future, this stretch has often delivered gains. For example, the market has risen 79% of the time during this period, with an average return of 1.38%.
Here’s the summary of our findings.
1. Thanksgiving Week Performance:
Since 1928, the S&P 500 has risen 60% of the time during Thanksgiving week, with an average gain of 0.28%.
In presidential election years, the success rate increases to 75%, with an average gain of 0.88%.
2. Thanksgiving to Year-End Performance:
The S&P 500 has gained an average of 1.38% from Thanksgiving through New Year’s, with positive performance 75% of the time.
In years with double-digit YTD gains by the Tuesday before Thanksgiving, the index has risen 70% of the time during this period, averaging a 2.4% gain.
3. Santa Claus Rally:
Historically, the last week of December and the first two trading days of January have delivered a “Santa Claus Rally” 79% of the time, averaging 1.3%.
However, in the years when the Santa Claus Rally did not occur (negative performance), the S&P 500 recorded a below-average annual return of 4.7% for the following year.
4. No Major Selloffs in Strong YTD Years:
There have been no significant December selloffs in the 35 prior years with double-digit YTD gains by Thanksgiving.
The notable -9.2% decline in December 2018 followed a YTD loss of -1.2%, distinguishing it from typical strong-performance years.
5. Market Dynamics for Value Investors:
Year-end gains are often driven by tax-loss harvesting, fund rebalancing, and holiday-season optimism, creating potential opportunities in undervalued sectors like industrials and financials.
High-growth sectors may become overextended during this period.
Looking back at the data, the Thanksgiving-to-New-Year period has historically been a strong time for the market.
Years like 2024, where the market is already up double digits by late November, have historically seen gains continue into December, with the S&P 500 rising 70% of the time and adding an average of 2.4%.
Finally, the Santa Claus Rally, another familiar pattern, has appeared in most years, though there are exceptions.
While these patterns are interesting, they are just data points—there’s no way to know how this year will play out. Do your own research.
Thank you for reading today!
Happy Investing,
Value Investor Daily
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