Seasonal trends are a frequently discussed topic on Wall Street, especially around this time of year as the market approaches the so-called “Santa Claus” window at the end of December. This year’s bear market certainly has investors hoping for some Christmas cheer. So thought we’d take a look at what the Santa rally phenomenon is all about and which club stocks have had the best and most valuable December track records in recent years. Is Santa Claus coming to town? The Santa Claus rally refers to the last five trading days of the year (in 2022 they are 23, 27, 28, 29 and 30 December, as markets are closed on Monday 26 December for Christmas) and the first two of the new year (January 3 and 4 again, as the markets are closed on January 2 for New Year’s Day). That’s a seven-day stretch that the S&P 500 has historically tended to climb over. The entire month of December has actually proven to be a historically strong period for the stock market. The S&P 500 has been positive 77% of Decembers since 1945, according to CFRA’s chief investment strategist, Sam Stovall. The index’s average monthly price return of 1.64% in December is the best of any month in this time frame, CFRA found. Investors would certainly welcome a strong December after a terrible 11 months for the stock market. But of course, past performance is no guide to future performance, and another word of caution is in order due to the S&P 500’s dismal year-to-date performance in 2022. In December, after the S&P 500’s 10 worst performances from January to November since Since 1945, the index has closed positive only 60% of the time, and its average price return is actually negative — down 0.33%, according to CFRA. This is all useful context to consider amid talk (hope?) of favorable seasonal trends. In addition, the Federal Reserve’s policy meeting next week could affect the market in a big way. We saw what happened back in 2018 when Fed Chairman Jerome Powell’s hawkish commentary injected fear into the minds of investors. The S&P 500 shed more than 9% that December, which at the time was worth its monthly performance in nearly a decade. In December, we will have to wait and see if the Fed begins a path of smaller rate hikes, or if it still has both feet on the brake in its continued fight against inflation. In fact, in December 2018, all 32 companies currently owned by Jim Cramer’s Charitable Trust declined, a reminder that seasonality is by no means the ultimate factor in determining market performance. Nevertheless, we think it’s definitely something to be familiar with, as long as you understand its limitations. Looking at a dozen December. Knowing the broad story of December’s typical strength, we wanted to see how individual stocks in our portfolio have fared over the month – an exercise not intended to inform investment decisions, but only to better understand , what has happened. in recent times for club names. Remember that many of the companies are drastically different companies now than they were e.g. 10 years ago. Whatever investor optimism or concern drove their trade then may be completely different now. More recently, Coterra Energy (CTRA), for example, was formed when Cabot Oil & Gas and Cimarex Energy merged in October 2021, a deal that made the new Coterra a 50-50 oil and night gas company. We looked back at the most recent December 12ths spanning from 2010 to last year. The S&P 500 for the month was positive 75% of the time, roughly in line with the index’s overall positive frequency dating back to 1945. Its average gain of 1.07% over the past 12 Decembers is a bit light compared to its nearly eight-decade track record. The S&P 500’s best December in this stretch was 2010, when it rose 6.53%. The worst was the aforementioned 2018, with a drop of 9.18%. We found that there were 13 Club stocks that were positive in at least nine of the 12 most recent Decembers, meaning they matched the S&P 500 by climbing at least 75% of the time. Morgan Stanley ( MS ) and Eli Lilly ( LLY ) were higher in 10 of the past dozen Decembers. These rose ninefold: Johnson & Johnson ( JNJ ), Microsoft ( MSFT ), Linde ( LIN ), Alphabet ( GOOGL ), Constellation Brands ( STZ ), Procter & Gamble ( PG ), Estee Lauder ( EL ), Cisco Systems ( CSCO ) ), Wells Fargo (WFC), Walt Disney (DIS) and Bausch Health (BHC). Meta Platforms (META) was published in 2012, so we only have December 10 data for the social media. It has been positive in five of those Decembers, with an average monthly gain of 0.62%. Here are the five Club stocks with the best average December gains since 2010. Despite its inclusion, it’s worth noting that shares of Advanced Micro Devices ( AMD ) were only positive for 50% of the past 12 Decembers. Large monthly gains of 17.1% in 2019, 27.3% in 2016 and 21.6% in 2015 had an overall impact on AMD’s average performance. The other four — Eli Lilly, Bausch Health, Morgan Stanley and Disney ( DIS ) — advanced at least 75% of the past 12 Decembers. You will notice that in the fourth column we show our club rating on each stock. For a look at how we make our ratings and how we use them to conceptualize our portfolio, see our commentary that fully explains our system. The five worst performing Club stocks in December since 2010 were Salesforce (CRM), has been positive for the month just twice over that stretch, as well as Amazon (AMZN), Coterra Energy, Costco (COST) and Nvidia (NVDA). It’s worth noting there’s only one more name in the portfolio with an average monthly performance in the red: Ford Motor (F). The automaker’s shares fell an average of 0.22% over the past 12 Decembers. Bottom Line Past performance is not predictive of future stock market performance. We hear that all the time, and it’s definitely a word to live by. The closest thing we can do to help predict what the market might do is to see what it has done over and over again in the past. Patterns such as seasonality can help contextualize some of the market’s short-term movements. However, as we noted earlier, they should not serve as a basis for long-term investment decisions. This December in particular, club members need to be aware of the impact next week’s Fed policy meeting could have on market direction. Hopefully we won’t get coal in our socks. (See here for a complete list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY ALONG WITH OUR DISCLAIMER. NO OBLIGATION OR OBLIGATION EXISTS OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR DILUTION ARE GUARANTEED.
Traders work on the floor of the New York Stock Exchange (NYSE) on October 27, 2022 in New York City. Stocks continued their upward gains on Thursday, with the Dow rising nearly 400 points after a new GDP report beat expectations.
Spencer Platt | Getty Images News | Getty Images
Seasonal trends are a frequently discussed topic on Wall Street, especially around this time of year when the market closes so-called “Santa Claus rally” window at the end of December. This year’s bear market certainly has investors hoping for some Christmas cheer. So thought we’d take a look at what the Santa rally phenomenon is all about and which club stocks have had the best and most valuable December track records in recent years.
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Advanced Micro Devices Inc Alphabet class A Amazon.com Inc Bausch Health Companies Inc Breaking News: Markets business news Constellation Brands Inc Costco Wholesale Corp Coterra Energy Inc Eli Lilly and Co Estee Lauder Companies Inc Ford Motor Co Investment strategy Jim Cramer Johnson & Johnson Linde PLC Markets Meta Platforms Inc Microsoft Corp Morgan Stanley NVIDIA Corp Procter & Gamble Co S&P 500 index Salesforce Inc The Walt Disney Co Wells Fargo & Co
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