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In Over a Year, U.S Stocks Are Poised for Their Best Month. It's a Good Sign for the Market in December and 2024

December 1, 2023
minute read

November has witnessed a substantial surge in stock markets, and historical data suggests that this positive momentum is likely to persist not only through December but also into the upcoming year.

According to Dow Jones market data, the Dow Jones Industrial Average (DJIA) has surged by 8% this month, positioning itself for its most substantial monthly percentage gain since October 2022, when it recorded an impressive 14% increase. Concurrently, the S&P 500 (SPX) has exhibited an 8.3% rise month-to-date, pacing for its most significant monthly gain since July 2022, when it marked a 9.1% uptick. The Nasdaq Composite (COMP) has also experienced a noteworthy 10% gain in November, positioning itself for its best month since July 2022, during which it soared by 12.4%.

This collective surge indicates that all three major indexes are set to conclude November with their most robust performances since 2020. Delving into historical patterns dating back to 1950, it is observed that the S&P 500 tends to sustain strong returns following a monthly gain of 8% or more. On average, it further increases by 1.8% in the subsequent month, maintaining a remarkable winning streak of 90% over the past year, with an average gain of 15.8%, as outlined by Ryan Detrick, the chief market strategist at the Carson Group.

Additionally, historical trends reveal a December rally in stocks following a robust year-to-date performance. According to FactSet data, the Nasdaq Composite has surged by 35% year-to-date. Historical data for the tech-heavy index indicates that when it has risen by more than 20% through November, it has closed December on a higher note 67% of the time, with an average gain of 3.7% for the month, based on Dow Jones market data. Similarly, the S&P 500, with an 18.2% gain this year, has historically concluded December on a positive note 75% of the time, averaging a 1.9% gain in December.

While past stock market performance provides valuable insights, it is essential to acknowledge that it does not always predict future results. Nevertheless, the recent rally in stocks aligns with investor expectations of the Federal Reserve initiating key interest rate cuts as early as March in the following year, even as the U.S. economy remains resilient. According to the CME FedWatch tool, traders are factoring in a 42.7% probability of the central bank lowering its interest rate by 25 basis points during its March meeting.

Louis Navellier, chairman and founder of Navellier & Associates, noted in a recent communication that the consensus outlook is leaning towards a soft landing, and geopolitical concerns have taken a backseat. He anticipates that investors will actively engage in the market during December, aiming to catch up with the robust performance. Barring unforeseen external shocks, Navellier expresses confidence that the prevailing trend will continue upward into the year-end.

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