The stock market’s exceptional performance this year may still have more room to grow, with sentiment lifted by recent gains and historical patterns. Stocks have reached record highs following President-elect Donald Trump’s victory earlier this month, as Wall Street remains hopeful about the incoming administration’s economic agenda, despite concerns over potential tariff risks. “While tariff threats could cause short-term volatility, the underlying market conditions are still favorable,” said UBS Chief Investment Officer. This year, the S&P 500 has hit over 50 all-time highs, with the Dow Jones Industrial Average and Nasdaq 100 not far behind.
Looking ahead, many strategists expect the market’s strong performance to continue through the year. At this point, everything at the market’s points to positivity in which it means to stay with the momentum and follow the trend. Historically, December is a strong month for the S&P 500. with the highest frequency of gains and the lowest volatility, nearly 40% below the average for other months since World War II. In this month, mid-cap and small-cap indexes have historically outperformed, along with sectors like Utilities, Industrials, Materials, and Financials. What makes this year even more notable is the election boost to market sentiment.
December is typically the second-best month for the S&P 500 during election years, with an average return of 1.3% since 1950. we also found that strong year-to-date performance often prompts investors to drive the market higher into year-end. In fact, in the 10 previous instances when the S&P entered December up more than 20%, the month posted an average gain of 2.4%. Looking ahead, the potential for a Santa Claus rally — a period of stock gains in the final five trading days of the year and the first two trading days of the new year — could further enhance returns.
