by Gary Alexander

December 14, 2021

Even though the S&P 500 eked out a new all-time high last Friday, the other three major indexes are still well below their record peaks as we lurch toward Christmas. That may be about to change. Over the last 70+ years (since 1950), December has been a “Tale of Two Halves.” Perhaps that’s tied to the winter solstice or a Santa Claus rally – take your pick – but the division is particularly strong after a (1) Negative November, and/or (2) 20%+ year-to-date market gains by the end of November – and both conditions held true in 2021.

S&P 500 Stocks Tend to Rally Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Since we are nearing mid-December, I decided to survey the last 10 years to see how this theory holds up.

S&P Performance in the First & Second Halves of December, 2011-2020

S&P 500 Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Summary: The first half of December declined six out of the last 10 years, while the second half advanced eight out of 10 times, with the second half outperforming the first eight out of 10 times by an average 2.6%.

This chart shows the same trend more dramatically – due to a generously inflated “Y” (vertical) axis.

S&P 500 Average Performance Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Some possible explanations are … the Christmas spirit and family gatherings… days starting to get longer on December 21 … we belatedly fund retirement plans for the current year or start funding next year’s plan …. we’re excited about New Year plans … Spring is approaching (in my Pacific Northwest, January is warmer than December, and February is often a delight) … plus College Bowls and Super Bowl playoffs!

This mid-December marks the meeting of the Federal Open Market Committee (FOMC). Tomorrow, on the 15th, the Fed Governors emerge from their Hobbit’s Hollow in their fortress on Constitution Avenue to tell us their taper timetable for the next month or two. Earlier tomorrow, at 8:30 am Eastern, we will also see the November Retail Sales report results. Either or both events could launch the market’s mid-month rally.

Bearish Grinches Can’t Steal the Christmas Spirit (Most Years)

Several Grinches tried to ruin this Christmas season. One was strangely named “Omicron,” a many-crowned creature that came to life the day after Thanksgiving – a day ominously called “Black Friday.” It also turned out to be the day revered Broadway composer, Stephen Sondheim, died in his sleep at age 91 (not of Covid) just as a new film of West Side Story was set to debut, so let me use some Sondheim titles to spin a yarn.

As 2020 dawned, I felt “Something Coming” (West Side Story). In 2020, we saw “Cities on Fire” (Sweeney Todd), and I felt I was “Losing My Mind” (Follies), especially after the election “Sent in the Clowns” (from Little Night Music), but “I’m Still Here” (Follies) and I still “Want to Live in America” (West Side Story), where “Everything’s Coming Up Roses” (Gypsy) in this “Best of All Possible Worlds” (Candide).  RIP, SS.

I speak quite literally: The U.S. is still the best of all possible worlds for immigrants to seek safety and potential wealth, and it’s the best of all possible stock markets for global investors; the best of all possible bonds for income investors, and the best of all paper currencies for those who don’t trust Gold or bitcoins.

This year, so far, the MSCI U.S. index is up 20.8% through last Monday, while the All-Country World ex-US MSCI is up just 2.3% in U.S. dollar terms, although it tallied +8% in terms of their own currencies.

Going back further, since we emerged from the 2008-09 Great Recession (on March 1, 2009) through November 25, 2021, U.S. earnings (+231.4%) have at least tripled the gains of the rest of the world:MSCI Forward Earnings per Share Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Despite these gains, economist Ed Yardeni has isolated 70 Panic Attacks on Wall Street since 2009. On Black Friday, Panick Attack #71 hit when the Omicron variant was announced in South Africa and the WHO (not the aging British rock band, but those scared bureaucrat doctors) convened to imagine the worst possible outcome, even though the South African doctor who isolated Omicron told us it was quite mild.

The Delta variant also triggered a major sell-off, but each Covid variant caused market panics followed by new market highs, including last Friday’s new peak. Variants generally give birth to new viruses, but they generally become less deadly, even if more contagious, as with Omicron. It could just become another flu.

Growth Stocks Continue to Double the Gains of Value Stocks

Since this column is named “Growth Mail,” I also want to add an occasional reminder that Growth stocks keep kicking the rear-end of Value stocks – since 2009, and especially in the last two years.  

Since March 9, 2009, the S&P 500 is up 570.8% with Growth stocks up 788.2% and Value up 376.9%. Factoring in dividends, the total return is over 10-fold for growth (+984.8%) vs. +558.7% for Value:

Growth and Value Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

During the pandemic, Value stocks were viewed more as “re-opening” trades, but that re-opening keeps getting kicked down the road. Meanwhile, Growth stocks are more tech-oriented and can function during lockdowns or social distancing, so you can see the Growth advantage widening during the pandemic.

S&P 500 Growth Divided by Value Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

To wrap up, since this is the midpoint of the birthdays of a great songwriting trio from the 1920s – Lew Brown (born December 10, 1893), Ray Henderson (December 1, 1896) and Buddy DeSylva (January 27, 1895), let me close with advice from four of their hits (1925-1932): “The Best Things in Life are Free,” so “Keep Your Sunny Side Up,” and “Button Up Your Overcoat” since “Life is Just a Bowl of Cherries.”

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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