Everybody remembers the bloody end to 2018, when stocks cascaded down and barely missed falling into a bear market (a loss of 20%). What a difference a year makes.
The late-2018 slide started in September last year and ended just before New Year’s, amid signs that the Federal Reserve was going to reverse its policy of monetary tightening and hopes burgeoned about the trade war.
As this year winds to a close, things are going well. “November has lived up to its reputation of kicking off the two-month stretch of seasonal optimism,” wrote Sam Stovall, chief investment strategist at CFRA, in a research note.
December has a good record for levitating stocks. Since 1945, Stovall noted, the month has been the best for the S&P 500, as well as featuring its lowest level of volatility. What’s more, he said, all the broad market indexes, including often lagging small and value stocks, sported positive average returns.
Small stocks, for instance, typically suffer amid uncertain times because an economic downturn would hit them the hardest. But this year, the small-cap Russell 2000 is ahead just under 20%, while the large-cap S &P 500 is up around 25%.
And that’s despite Monday’s stinky start to the year’s final month, amid disappointing manufacturing data and questions about the trade talks after President Donald Trump signed a congressional measure backing the Hong Kong protesters against the Beijing regime.
The S&P SmallCap 600, Standard & Poor’s small stock index, should see buoyant earnings growth next year, Stovall indicated, citing analysts’ consensus—up a projected 20%, versus a 3.3% drop in 2018.
Not all stock sectors are enjoying this party this year. Defensive groups like utilities aren’t surging, while health care is second to the bottom but is at least in positive territory. Perennial laggard energy is in last place, with a negative showing.
November, Stovall declared, “sets a favorable tone as we enter the final month of the year that has traditionally recorded the best average return.” And that sounds like a good Christmas present, as opposed to last year’s lump of coal.