December is Bullish for Stocks



Stock market


Most people are aware that December has been one of the better months for stocks. The chart below shows the average monthly return for the Dow Jones Industrial Average Index going back to 1929.  On average, blue chip U.S. stocks have risen by about 1.5% in December.

And it gets better. On a risk adjusted basis (average monthly return / standard deviation of monthly returns) December is the clear winner:

The next chart shows the cumulative December returns (blue line) versus the average month cumulative returns (red line).  As a comparison, the red line shows the cumulative September returns, historically the worst month of the year.

As you can see, December has been a consistent performer for stocks, easily beating the average monthly return.  September, however, has been very poor and it was again this year with the Dow Jones Industrial Average Index falling by 6%.

In short, December has been bullish for stocks.


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