DECEMBER: THE BEST MONTH OF THE YEAR SINCE 1950

Following seasonal patterns has worked fairly well this year and with December just days away it’s useful to look at the historical statistics.  December has been the best month of the year since 1950.  Given the oversold conditions, prospects for a Eurozone solution and generally high levels of fear, seasonal patterns could ring true into the holidays.  From The Stock Traders Almanac:

◆ #1 S&P (+1.6%) and #2 Dow (+1.7%) month since 1950, #2 NASDAQ (2.0%) since 1971.

◆  2002 worst December since 1931, down over 6% Dow and S&P, –9.7% on NASDAQ.

◆ “Free lunch” served on Wall Street before Christmas.

◆ Small caps start to outperform larger caps near middle of month.

◆ 1998 was part of best fourth quarter since 1928.

◆ Fourth quarter expiration week most bullish triple witching week, Dow up 15 of last 19.

◆ In pre-presidential election years December’s rankings slip: #3 S&P and Dow, still #2 NASDAQ month.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. december to me really means fiscal year end, and audits around the corner.

    just wondering if anyone here at pragcap expects, as i do, that there will be more negative bank and corporate news soon to be announced as auditors come in and ask some nasty questions.

    wonder if there is a difference between us and eu auditing standards in this regard, as i would think there is alot more b/s pretending going on in the eu than the us

  2. Cullen,

    You may want to take a look at:

    December (Not So) Super Duper Bullish « MarketSci Blog http://stock.ly/1vk36t

    It makes some fine distinction to how December has been depending on the previous 11 months performance, and may make you reevaluate the Traders Almanac.

    -Brian

  3. Chris: ["just wondering if anyone here at pragcap expects, as i do, that there will be more negative bank and corporate news soon to be announced as auditors come in and ask some nasty questions."]

    Audit work usually involves substantial “interim” audit activity well before year end, and includes meaningful discussions between management and auditors at each quarter end, particularly at S&P 1000 level companies.

    Year-end audit activity primarily involves confirming year end financial statement balances and, when necessary, addressing ongoing issues reported on via footnote disclosures.

    In other words, any “nasty questions” are usually addressed and resolved prior to year end, although that nasty stuff can occur in Q4, of course.

    As for negative “news” (meaning non-financial-reporting data not subject to auditor review), that is always a possibility but arises from events not affected by auditing unless it involves things like going concern questions.

    Bottom line, I do not expect “more negative … news” simply because auditors are performing their year end work.

    • @pedro

      sounds like your clients listen to your advice. audit clients have been known to take interim auditing reviews under advisement and not take the medicine until the auditing firm is ready to sign the opinion…or not

  4. Chris …

    It’s not a perfect world out there, of course. My comments were general, reflecting the normal … there’s always the aberrant client who bears closer scrutiny. The prudent auditor must know his clients well.

    • @cpa

      here is what i was alluding to (from egan jones downgrade of france to a):

      “For the most part, over the past 18 months France has been exempted from the rise in funding costs. However, as the crisis evolves, we expect that France will be pressured. The deterioration in France’s credit metrics combined with the needed supported for France’s banks are likely to pressure the country. A major catalyst is likely to be the year end financials for France’s banks; watch for a significant support program to be announced over the next couple of weeks.”

      it is just my sense built up over time that corrective action tends to be taken at yer end when things are slipping over the year…

  5. IMO – If december 2011 turns out to be a bad/”"not so good”" month then we’re in for some REAL REAL trouble. But with Europe in deep trouble I have a hard time believing december could be a positive month. We’ll have to wait and see.

  6. Don’t forget to “go away in May”. It’s aways hard to do when things are finally lookin’ OK for a change. But GO AWAY IN MAY.