11 months ago • 1 min
This nifty chart shows us year by year how the S&P 500 did during the “Santa Claus” period (that’s the last full trading week of December through the first two trading days of January), and how it then did across the full month of January, the first quarter, and the full year. The most recent Santa period, then, was from December 23rd, 2022, through January 4th, 2023, with the index up by around 0.8%.
Looking back at how things panned out since 1985 when the Santa Rally was positive, January saw a 0.6% median rise with returns positive 62% of the time, the first quarter saw a median gain of 1.7% and was positive 66% of the time, and the full calendar year saw median returns juiced to 12.7% and was positive a solid 76% of the time.
Now, although these statistics can be helpful for your investing process, the thing to remember with medians is that each year can have big positive and negative outliers. This year, for example, we could see a year of negative returns, with those recession drumbeats growing louder and the Federal Reserve still laser-focused on taming inflation with interest rate increases.
But there’s something else that caught my eye recently: the relationship between riskier high-yield corporate bonds and the S&P 500. Going back to 1990, when high-yield bonds have had a down year, the S&P has delivered a 12-month median return of 27% the following year. And that’s been a reliable pattern, playing out six out of seven times. So maybe, just maybe, the S&P 500 could shock the downbeat consensus this year and deliver some positive gains for your stock portfolio.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
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