December Super Duper Bullish

29Nov11

The end of November is nigh. This is a quick look at how the U.S. market has performed historically in December.

First, the numbers…

December has significantly outpaced the average month over the last 80+ years across all metrics, particularly the one I think matters most: average return / std. dev. of returns. From this 30,000 foot view, December has been far and away the most bullish month of the year.

But averages can be misleading because they say nothing about how consistent an observation has been or whether it’s waxing or waning, so below I’ve assumed a trader was only long the S&P 500 in December (red) versus the average month (grey) each year since 1930.

The graph appears to show December consistently outperforming the average month since (at least) 1930. To confirm, below I’ve shown the rolling 10-year average excess return in December versus the average month.

Note mostly consistent outperformance since at least 1930.

Like all seasonality plays this one has by no means been a sure thing and doesn’t by itself justify a trade, but I’m calling the calendar month bias for December as BULLISH.

See the monthly seasonality map for daily seasonality predictions in December.

Happy Trading,
ms

Geek note: returns are dividend-adjusted. Dividends interpolated from quarterly data before 1988. S&P 500 TR index used 1988 and beyond.

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5 Responses to “December Super Duper Bullish”

  1. 1 Rod

    Thanks.
    I guess every joker will now go long the last week of Nov to be positioned!

  2. I wonder if this observation holds true during years when the January – November returns are negative. In other words, does “tax loss selling” blunt or negate December’s “Super Duper Bullishness”?


  1. 1 Tuesday links: risk is king | Abnormal Returns

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