December's Cheers

By Dian Vujovich

Here are we well into December and if you’ve wondered what the trading history of this 12th month has been like, it’s basically okay. Mostly.

Look at the past performance of the S&P 500 and ever since 1950, December been an up month averaging a gain of 1.8 percent, according to a piece by Gary Alexander titled “Santa Claus is Coming to Wall Street”. In 1991, for instance, the month was particularly hot as the average gained over 11 percent. In 2002, particularly cold losing 6 percent.

All total, from 1950 through 2008, the average has been up during this last month of the year about 75 percent of the time.

As for that Santa Claus Rally that ran from December 26 to January 6, it’s pretty much history. Been replaced by a longer span of time—Thanksgiving through the month of January eating up all rallies in between including Santa’s and the January Effect.

According to InvesTech Research, here’s how a look at the average market gains from November 20 to January 31:

• From 1928 to 1969, the S&P 500 gained 1.8 percent. That was when Santa’s rally mattered as all the gains were gotten between December 26 and January 6.

• From 1970 to 2008, the average gain was 4.2 percent. If you recall, last year the market was up 9.8 percent in that 10-week span (November 20 to January 31).

Looking at a few years before 1950, December was a month had some interesting moments. In 1914, for instance, the San Francisco Stock & Bond Exchange was the first to re-open on December 1 after the outbreak of World War 1.

Then when Gerald Ford was president, on December 2, 1974, he announced that the country was in a mess with inflation, a recession and oil prices all hitting us. The Dow fell 6.6 percent the next day to close at its lowest in 47 years at 577.6 on December 3.

Orange County in California declared bankruptcy on December 6 in 1994. The Dow fell 60 points over the next two days. But, bounced back strongly over the next five years tripling in value.

And so goes the battle. This year, this month could turn out to be a jolly one. Then again for a month that’s been the hap-hap-happiest for some investors comes with no guarantees