U.S. stock-market investors looking at their returns over the month of December should be pleased — but they shouldn’t be surprised.
Wall Street has extended one of its most pronounced seasonal patterns by rising over the course of the year’s final month, which is historically the best month of the year for stocks.
According to the WSJ Market Data Group, the Dow Jones Industrial Average, the S&P 500 and the Russell 2000 have all “ended higher in December more than any other month.” The Dow has enjoyed a positive December in 71% of all years going back 120 years, while the S&P has ended up 73% of the time.
Small-capitalization stocks have seen particular strength in the month, historically, as Santa Claus visits the Russell in 87% of Decembers.
Over December, the Dow Jones Industrial Average DJIA, -0.48% rose 1.8%, outpacing the average December return of 1.41%, which is the highest average of any month for the Dow, historically speaking. The S&P 500 SPX, -0.52% rose 1% for the month, below its own historical gain of 1.41%, which places December second only to July.
December has typically been less good to the Nasdaq Composite Index COMP, -0.67% , which rose 0.4% over the month. Historically, it rises 1.84% over the month, its second-best month behind January (which has an average gain of 2.39%). It ends December in positive territory 59% of the time; the Nasdaq’s best month is November, which it rises over in 68% of the time.
The Russell, however, has underperformed its average, while remaining in positive territory. The Russell RUT, -0.87% fell 0.6% over the month, a far cry from its average December return of 3.19%, which is its highest average return for any month historically. Per WSJ Market Data Group, the Russell has outperformed the S&P in 21 of the past 30 Decembers; since the small-cap index’s inception, it has outperformed the S&P in December more often than any other month.
Gains in the month have in part come on the recent passage of a tax-reform plan out of Washington, which will lower statutory corporate tax rates, among other changes seen as providing a tailwind to equities. The energy sector has also been a strong supporter of overall market gains. While it ended down 3.8% for 2017, making it one of only two negative sectors on the year, it gained 6.4% over the past month.
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By closing higher for the month, major indexes set or extended some notable records. The Dow posted its ninth straight monthly gain, its longest such streak in nearly 59 years. On Thursday, the blue-chip average closed at a record high for the 71st time this year, a record-setting number of records.
The S&P 500 also notched its ninth straight positive month, the longest such streak for the benchmark index since April 1983. On a total-return basis, however, the S&P rose for its 14th straight positive month, a record.
Gains have also been strong on a global basis. Global stocks, as measured by the MSCI All-Country World Index, haven’t had a down month since October 2016. The index ended 0.5% higher for December, marking the first time in history that every month in a calendar year has been positive.
Read: Global stocks could make history this month by refusing to fall