December 2023 – It’s the Most Wonderful Time for The Markets

December 2023 - It's the Most Wonderful Time for The Markets

It’s the most wonderful time of the year…for the stock market? With all this potential recession talk that has lasted two years, you would expect a lump of coal to arrive in your Christmas stocking this year. But quite to the contrary, Santa Claus appears to have arrived early this year as evidenced by the 8.9% spike in the S&P 500 last month, the largest monthly increase in 10 years.  November broke a streak of three consecutive down months for the S&P 500 and did so in style. After the banner month of November, investors are hoping to see returns remain merry and bright.

The month of December already tends to be bullish; in pre-election years, the S&P 500 has been positive more than 72% of the time since 1950 with an average return of 2.9%. Historically, the strongest returns are often loaded into the second half of the month, hence the “Santa Claus Rally”. From a longer-term and historical perspective, higher returns are even more likely when they follow strong performance like we saw in November. As portfolio managers begin to window dress their funds for the upcoming new year, we may see the continued effects of the Santa Claus rally from the last five trading days of December through the first two trading days of January.

There are several plausible reasons for the jolly market movements in November. The Federal Reserve confirming their intention of pausing interest rate hikes certainly helped to excite investors. Since the Fed started hiking rates, inflation has declined meaningfully to 2.5% which remains just above the Fed’s 2% target. The downward movement in rates means lower and more attractive borrowing costs for business loans, mortgages, auto loans, credit cards and other debt vehicles. In addition, the most recent GDP (Gross Domestic Product) figure for the 3rd quarter came out at a blistering 5.2% growth rate. The economy continues to thrive, fueled by a strong labor market.

Will Santa return at the end of December? We will have to wait and see. The signs are pointing to markets regaining new highs as early as January. Also, seasonal market trends are often difficult to break but they are never definitive. Santa certainly left investors on the naughty list in 2022 when the S&P500 was down -5.9% for the month of December and closed out the year at -19%. Bah humbug. Despite ongoing narrow leadership and increased concentration in the growth indexes, 2023 is shaping up to be a much better year than the previous. As always, the time to make sure your portfolio is allocated properly is when everything is looking jolly. If you were uncomfortable during the month of October, you may be allocated too aggressively and can use last month’s run up to move into more conservative strategies. Making decisions based on emotions often lead to investors getting “Scrooged”. Your investment procedures should always be followed, regardless of which way the market is moving. If you have questions about your current portfolio or investment strategy, we are always happy to help. From Ashley and the team at Victory we wish you and your family Merry Christmas and a happy and healthy New Year!


Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.

Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.




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