Seasonal trends are an often-discussed topic on Wall Street, especially at this time of year as the market approaches the so-called “Santa Gathering” window in late December. This year’s bear market certainly has investors hoping for a bit of holiday cheer. So we thought we’d take a look at what the Santa’s Rally phenomenon is all about and which Club stocks have had the best and best December records in recent years. Is Santa Claus coming to town? Santa’s Gathering refers to the last five trading days of the year (in 2022 these are December 23, 27, 28, 29 and 30 since markets are closed on Monday December 26 for Christmas) and the first two of the new year (on January 3 and 4, again, since the markets are closed on January 2 for the New Year). This is a seven-day period over which the S&P 500 has historically tended to rise. The whole month of December indeed turned out 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 chief investment strategist Sam Stovall. The index’s average monthly price return of 1.64% in December was the best of any month during that period, the CFRA found. Investors would surely welcome a strong December after 11 terrible months for the stock market. But, of course, past results are not indicative of future performance, and a further caveat is in order due to the dismal performance of the S&P 500 since the start of 2022. In the months of December tracking the 10 worst S&P 500 January-November performances since 1945, the index has only ended positive 60% of the time and its average price return is actually negative — a decline of 0.33%, according to CFRA. All of this is useful context to consider amid the chatter (hope?) of favorable seasonal trends. Additionally, the Federal Reserve policy meeting next week could significantly influence the market. We saw what happened in 2018 when Fed Chairman Jerome Powell’s hawkish comment struck fear in the minds of investors. The S&P 500 fell more than 9% in 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 small interest rate hikes or if it still puts the brakes on both feet in its continued fight against inflation. In fact, the 32 companies currently held by Jim Cramer’s Charitable Trust declined in December 2018, a reminder that seasonality is by no means the ultimate factor determining market outcomes. Still, we think it’s definitely something to be aware of as long as its limitations are understood. Looking at a dozen months of December Knowing the broad history of typical December strength, we wanted to see how the individual stocks in our portfolio performed during the month – an exercise that is not intended to form the basis of any investment decision, but only to better understand what has happened in the recent past for club names. Keep in mind that many businesses today are radically different than they were, say, 10 years ago. Whatever investor optimism or concern fueled their trade back then, it may be completely different today. More recently, for example, Coterra Energy (CTRA) 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 gas company. We looked at the last 12 months of December, 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 months of December is a little lightweight compared to its nearly eight-decade experience. The S&P 500’s best December in this sequence was 2010, when it rose 6.53%. Its worst was the aforementioned 2018, when it fell 9.18%. We found that 13 Club stocks were positive at least nine of the last 12 months of December, 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 last twelve months of December. These increased nine times: 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) went public in 2012, so we only have December 10th of data for the social media stock. It was positive in five of those Decembers, with an average monthly gain of 0.62%. Here are the five Club stocks with the best average gains in December since 2010. Despite its inclusion, it’s worth noting that Advanced Micro Devices (AMD) stocks have only been positive in 50% of the last 12 months of December . Large monthly gains of 17.1% in 2019, 27.3% in 2016 and 21.6% in 2015 had an outsized impact on AMD’s average performance. The other four – Eli Lilly, Bausch Health, Morgan Stanley and Disney (DIS) – have advanced at least 75% of the last 12 December. You will notice that in the fourth column we list our Club rating on each stock. To see how we do our ratings and how we use them to conceptualize our portfolio, see our commentary explaining our system in detail. The five worst performing Club stocks in December since 2010 were Salesforce (CRM), which was positive during the month only twice during this period, as well as Amazon (AMZN), Coterra Energy, Costco (COST) and Nvidia (NVDA). It should be noted that there is only one more name in the portfolio with an average monthly performance in the red: Ford Motor (F). Shares of the automaker have fallen an average of 0.22% over the past 12 months of December. Conclusion Past results are not predictive of future stock market results. We hear that all the time and they are certainly words to respect. The closest thing we can do to help predict what the market might do is to see what it has done time and time again in the past. Patterns such as seasonality can help contextualize some of the market’s short-term movements. However, as noted earlier, they should not be used as the basis for long-term investment decisions. In December, in particular, Club members should be aware of the influence that the Fed’s policy meeting next week could have on the direction of the market. Hopefully we don’t have coal in our stockings. (See here for a full list of Jim Cramer’s Charitable Trust stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim 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, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS 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 upside gains on Thursday with the Dow Jones up nearly 400 points on a new GDP report that beat expectations.
Spencer Platt | Getty Images News | Getty Images
Seasonal trends are an often-discussed topic on Wall Street, especially at this time of year as the market approaches the so-called “Santa Gathering” window in late December. This year’s bear market certainly has investors hoping for a bit of holiday cheer. So we thought we’d take a look at what the Santa’s Rally phenomenon is all about and which Club stocks have had the best and best December records in recent years.
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