December Upside for S&P 500 After 20%+ Rally, History Suggests

The U.S. stock market is on a record-setting trajectory, with the S&P 500 reaching over 50 all-time highs this year, and the Dow Jones Industrial Average and Nasdaq 100 also showing strong performance. This bullish trend is expected to continue, fueled by President-elect Donald Trump's victory and Wall Street's optimism about his economic policies, despite potential tariff-related volatility as noted by UBS's Mark Haefele.

Historically, December has been a robust month for the S&P 500, with the highest frequency of gains and lower volatility compared to other months. The S&P MidCap 400 and SmallCap 600 have particularly excelled, along with the Utilities, Industrials, Materials, and Financials sectors. This year is further distinguished by the election's impact, making December the second-best month for the S&P 500 in election years, with an average return of 1.3% since 1950, as analyzed by Carson Group's Ryan Detrick.

Moreover, when the S&P 500 has entered December with a gain of over 20%, it has seen an average December gain of 2.4%. The prospect of a Santa Claus rally, marking a rise in stock prices in the last five trading days of the year and the first two of the New Year, could also contribute to positive year-end performance.