Since 1950, December has been the best month of the year for the S&P 500, and second best for the Dow Jones Industrial Average and Nasdaq Composite Index.
Historically, it's also Wall Street's only "Free Lunch" before Christmas, when investors tend to close out their losing positions for tax purposes, often sending these stocks to "bargain" levels. According to the Stock Trader's Almanac , the "Santa Claus Rally" comes to Wall Street almost every year, pushing stocks higher during the last five days of the year and the first two in January. When Santa fails to show, however, the market tends to trend lower.This month, the S&P 500 is down about 1.5 percent, on track for its worst monthly performance since September, when it fell 7 percent.The NASDAQ and Dow industrials are also on pace for their worst monthly loss since September, down 3 and 0.08 percent, respectively. When November is a negative month, however, all three major averages tend to uptick in December.
In the past 11 years, the Dow industrial average posted a gain of 1.37 percent in December, while the S&P 500 and Nasdaq have averaged returns of 1.2 percent and 0.44 percent, respectively.The table below highlights the Dow industrial average's performance in December, compared to its returns in other months. Since 2000, December has been the index’s third best month.Page 1 of 3 | Next Page