The S&P 500 (SPX) has returned about 14% year-to-date, although more gains could be just around the corner, according to Bank of America. “Q4 tends to be the most wonderful time of the year,” said the bank, adding that the benchmark index has historically risen during the quarter 74% of the time with an average gain of 2.84%.
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Technology stocks tend to rise during the fourth quarter as well, with the Nasdaq 100 (NDX) up 69% of the time with an average gain of 6.16%.
Santa’s Coming to Town
Bank of America adds that investors should also watch out for the “Santa Rally,” a phenomenon where stocks often rise in the final weeks of December. Since 1950, the seven-day period spanning the last five trading days of December and the first two trading days of January has been positive 79% of the time with an average return of 1.3%, according to Investopedia.
The move is often tied to lighter trading volumes, year-end portfolio adjustments, and a surge in holiday spending, all of which tend to support equities heading into January.
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