How December Ends: What History Says About the Market
As the year winds down, investors are eagerly eyeing the new year while trying to squeeze out those final gains to put a cherry on top of their yearly performance. With 2025 approaching its end, I think it’s worth taking a step back and looking at history to better understand how to trade this December.
Historically, December has been a strong month for equities:
Since 1980, the S&P 500 has averaged a 1.3% gain in December.
It’s relatively rare for December to finish negative — it has only happened about 27% of the time since 1980.
The Nasdaq Composite performs even better, posting an average 1.5% rise in December.
So based on this, are we going to see the fabled Santa Claus Rally?
To answer that, we need to understand the market going into this month.
Government Reopens
The government has recently reopened after its longest shutdown ever. Investors and consumers will be less fearful and more willing to invest. This also means key economic data will resume, giving the market essential information to digest.
Record Black Friday Results
Black Friday spending hit an all-time high this November. Consumers have more disposable income and are clearly willing to spend.
Strong Tech Earnings
Tech continues to lead the market. GOOG rallied, NVDA beat earnings, and PLTR also beat. Tech has continued to beat expectations and lead the market.
Fed Rate Cut Expectations
The Fed has begun leaning heavily toward cutting rates by 25 bps. Lower rates mean cheaper borrowing, more liquidity, and generally a more supportive environment for the stock market.
THE DIAGNOSIS
I think the bears have gone into hiding and the bulls will own the rest of the year. I believe this December we’ll see new highs across all three major indexes. And as a small tip of advice: as the year ends, people love to cut their losers and hold their runners.
So if you’re holding stocks that have been performing poorly, they might continue to fall as investors tax-loss harvest. Meanwhile, stocks that have been performing well will likely keep rising as investors let their winners run to close out the year strong.
