Seasonality often gets dismissed as folklore. Yet history keeps proving that the final stretch of the year — November and December — has been a sweet spot for equity investors. Both history and the present setup argue for staying risk-on into year-end, writes Michael Gayed, editor of The Lead-Lag Report.
Over the past 50 years, the S&P 500 Index (^SPX) has rallied in November roughly 73% of the time, averaging gains of around 2%. December follows closely: Since 1950, it has been the second-best month, with an average gain of 1.6% and nearly three-quarters of Decembers ending higher.
This pattern has inspired the familiar “Santa Claus Rally” narrative. Charts of long-term monthly returns consistently show November and December towering over other months. Even when markets have stumbled earlier in the year, this late-year stretch has frequently delivered a recovery as optimism builds around earnings, holiday spending, and the coming year’s outlook.
The reliability of this effect stands out. In a half-century sample, about three out of four Novembers or Decembers end positive. By contrast, September’s historical win rate is barely above 40%. Staying invested through the holidays has simply paid off more often than not.
Add in today’s Federal Reserve easing cycle, resilient earnings, and (relatively) contained volatility, and the environment looks tailor-made for another seasonal rally. As long as inflation remains steady and financial conditions don’t tighten unexpectedly, equities appear to have the wind at their backs heading into the holidays.
In short, while past performance never ensures future results, the combination of favorable seasonality and supportive macro dynamics gives investors plenty of reason to keep portfolios positioned for upside through December.
