When Andy Williams released the song "It's the Most Wonderful Time of the Year" on his first 1963 Christmas album, the S&P 500 was singing a bullish tune of its own. The index had just hit a record high of 74 points, shaking off the scars of the 1962 bear market.
Fast-forward 61 years, and history looks ready to rhyme: the U.S. stock market is again trading at all-time highs as the holiday season ushers in what has historically been a joyful period for investors.
If history is any guide, the next five weeks could be a strong, if not the best, time of the year for U.S. equities.
December: A Tradition Of Holiday Cheer On Wall Street
Since 1928, the S&P 500 index — as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) — has averaged a 1.25% gain during the month, making it the second-best performer of the year, behind only July.
But here's the kicker: when you include the final week of November, the stock market truly enters its most wonderful time of the year for investors.
“I think that U.S. equities will rally starting next week into the end of the year, with the S&P 500 hitting 6,200,” Goldman Sachs analyst Scott Rubner said last Friday.
“We are entering the best seasonal period of the year for U.S. equities,” he added.
Both the S&P 500 and the Dow Jones Industrial Average surged to record highs on Monday, driven by investor optimism following reports of a cease-fire agreement between Israel and Lebanon that eased geopolitical concerns in the Middle East.
The Thanksgiving Week’s Effect
Thanksgiving week itself has a solid track record of lifting the S&P 500.
According to Stephen Suttmeier, a Bank of America analyst and market technician, the index has risen 60% of the time during Thanksgiving week since 1928, delivering an average return of 0.28%, or 0.46% median.
In a note shared to clients on Monday, Suttmeier highlighted that in the period from Thanksgiving through the end of the year, the S&P 500 has climbed 71% of the time, with an average return of 1.46%, or 1.70% median.
“Thanksgiving into year-end SPX seasonality is strong for all years and in Presidential election years,” Suttmeier wrote.
| Indicator | Thanksgiving week | Thanksgiving through Dec. 31 |
Thanksgiving week (Presidential election years) |
Thanksgiving through Dec. 31 (Presidential election years) |
|---|---|---|---|---|
| Average | 0.28% | 1.46% | 0.88% | 1.38% |
| Median | 0.46% | 1.70% | 1.08% | 1.6% |
| % Time positive | 60.42% | 70.83% | 75% | 75% |
Election Years Also Show Solid Year-End S&P 500 Returns
Since 1928, the S&P 500 has posted gains in 75% of election-year Thanksgiving weeks, with an average return of 0.88% or 1.08% median.
The post-Thanksgiving to year-end period has also delivered the goods, with the index rising 75% of the time, delivering an average return of 1.38%, or 1.6% median.
As investors dig into their turkey this Thanksgiving, they might also consider digging into some U.S. equities.
After all, history suggests that the combination of optimism, holiday spending and year-end portfolio adjustments could be the season of giving — at least on Wall Street.
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