We just finished the worst end of the year for the S&P 500, looking back at data for the S&P 500 from 1950. What do I mean?
If we look at the performance for the S&P 500 from Christmas Day until the end of the year this year the S&P 500 produced a loss of 2.6%. This is the worst performance looking at data from 1950.
What does it mean and why did it happen?
If we take a look back to 2023, we saw the S&P 500 put in a return of greater than 20%. In 2024, heading into December, from January to November, we saw the S&P 500 up over 25%. In December, we saw a negative month, and we saw a really weak finish for the end of the year.
A lot of people call the days around Christmas the Santa Claus rally. There's different dates for it, but generally speaking, the days around Christmas tend to be strong. That's not what happened this year at all. And it really was profit-taking after a really strong 2023, really strong January to November for the S&P 500 in 2024. What does it mean coming up though into January and even into 2025?
If we take a look at all the negative years in the past, when the years finished poorly from Christmas day to the end of the year, January in the next year has produced an average return of 1.9%, and has been positive 63% of time, which is better than the average January since 1950.
If we take a look at the returns in January after we've seen this weak period at the end of December tends to be more volatile. We've seen some large gains and some large losses as well, but the dispersions increase for January. However, on average the return for January is better after the negative period at the end of December.
Of course, we have a big event coming up in January this year, in 2025, with Trump being inaugurated, and that can throw a little bit of a wrench into things. We might see the market pause, before the inaugeration waiting for some announcements to be made on January 20th. I have a feeling that a lot of the initiatives that Trump will announce on January 20th are probably going to be market friendly. He might save some of the other initiatives until later on. If we look at seasonal trends, we should probably expect January to be a positive month. In particular, it tends to be a little more positive after we've seen a weak finish to December. Overall, the trends for the market in January tend to be favorable.
Thank you very much for joining me today.
