DECEMBER TRENDS:

Typically, markets are always headed into a bit of a soft patch towards the Christmas season, and we expect a slight pullback.  Often viewed by advisors as the “sweet-month,” this is usually a good time to put money into the market to continue to build a higher return anticipated to come in the New Year.

December tends to gain strength towards the end of the month as we go into January, with an average monthly gain expected to be 1.67% each year.

JANUARY TRENDS:

Another thing to keep in mind if you are thinking of investing at the end of the year is the “January Effect,” which is often viewed as a seasonal increase in stock prices.

Since 1928, analysts have been tracking stock movement and have found that the S&P tends to rise on average 60.5% of the time in January alone.  Analysts who have studied this theory (economic data of market trends from 1905 to 2005) speculate that January has a 4-6 times greater increase in stock performance than any other month during the year.  One theory is that many investors tend to sell high-year-end stock in December due to capital gains tax and then purchase weaker stock picks in January.  Investors usually know that the drop in stock prices in December is not based on corporate fundamentals, but rather tax loss harvesting, and therefore prices get driven up abnormally higher in January due to buying frenzies.

AFTER THE SUMMER TRENDS:

September historically tends to be the worst month for US stock from a performance standpoint with the S&P500 logging an average loss of 0.6% going back to 1945.  Do not be surprised if your portfolio struggles a little at the end of the summer.  Third quarter results tend to exhibit weaker price returns historically.  Think of this period as an upcoming “sale” to buy good high quality stock.

October, November and December are typically among the best months of the year in terms of price performance with the S&P500, and historically average gains of 1% to 1.6% during these last months of the year.