December is typically good month for stocks; technicians expect another good one

It looks like nothing but upside ahead in December. The final month of the year is typically a good month for the stock market. December is historically the second-best month during presidential election years for the Dow Jones Industrial Average and S & P 500 ; the benchmarks are up 1.3% and 0.8% on average, respectively, according to The Stock Trader’s Almanac. For the 30-stock Dow, those gains would mean a jump to nearly 45,500 from Friday’s levels, at 44,910.65. The S & P 500 could rise to about 6,081, from where it closed last week at 6,032.38. But market observers and technicians are optimistic the benchmarks could perform even better than usual, given what has been an atypically strong year . One final push in 2024 to an above 27% rally for the S & P 500, which is already higher by 26%, would place this year’s advance among the best in history . .SPX YTD mountain S & P 500 “New highs tend to lead to more new highs within primary uptrends,” Craig W. Johnson, chief market technician at Piper Sandler, wrote Monday. “Also, our research showed that when January-November SPX returns were greater than 25%, December had an average return of 1.4% and a median of 1.3%, with a 71% positivity rate.” That means the S & P 500 would top 6,100, according to Johnson, who sees small-cap and midcap stocks as primary beneficiaries of the broadening rally. Oppenheimer’s Ari H. Wald pointed out that December returns are more than double what typically happens in any given month when the S & P 500 starts above its 200-day average, as it has this year. “Since 1950, the S & P has averaged a 1.8% gain and traded higher 79% of the time when starting December above its smoothed trend vs. an average 0.8% gain and 64% positive hit-rate when starting below it,” Wald wrote Saturday. “The S & P has averaged a +0.7% return and traded higher 60% of the time for any given month.” This means the S & P 500 could end the year around 6,140. Elsewhere, CFRA’s Sam Stovall wrote Monday that he sees “additional new highs through year-end” as the index approaches the firm’s 6,145 price target. Roth MKM’s chief market technician JC O’Hara wrote that he sees a path toward 6,200. Much of this month’s seasonal gains are likely weighted toward the back end of December. The so-called Santa Claus rally that bolsters stocks occurs in the final five trading sessions of the month, and the first two of January. On average, the S & P 500 gains 1.6% during this period. What’s more, a strong month and year could bode less well for 2025, when many strategists are forecasting more lackluster advances of roughly 10% for the S & P 500. Investors fear this month’s gains may be pulled forward from January and next year. Still, for 2024 at least, December promises to cap off the year on a strong note. “While there are likely to be a few more hiccups before the year wraps up, the path of least resistance remains higher,” BTIG’s Jonathan Krinsky wrote Sunday.