Random Thoughts

November has lived up to its reputation of kicking off the two-month stretch of seasonal optimism, as the S&P 500 gained 3.4% month-to-date through November 26, led by its value index and several cyclical sectors, while the defensive groups were dramatic laggards.

Finally, 74% of the S&P 1500 sub-industries advanced in price, led by broadcasting, copper and movies & entertainment, while gas utilities, health care REITs and textiles posted the deepest declines.

Seasonal optimism typically gathers additional steam in the final month of the year as investors look to earnings projections for the coming year.

Indeed, since 1945, the S&P 500 posted its best average return in December, along with the highest frequency of advance and lowest level of volatility. In addition, all of the broader indices recorded positive average returns in December since 1995, led by small caps and value stocks. What’s more, all 11 sectors rose on average, led by communication services, real estate and utilities. Laggards included consumer staples, health care and tech stocks.

Finally, 87% of the 101 sub-industries in the S&P 1500 that have been in existence for at least 20 years gained in price, led by fertilizers & agricultural chemicals, homebuilding and home improvement retail, while the worst performers included computer & electronics retail, department stores and leisure products.

What could be the drivers this December? Trade relations, earnings estimates and valuations will likely influence trading this month, while the angle of ascent for U.S. economic growth, along with the presidential primaries, will garner additional attention as the new year progresses.