Good morning, investors. It’s the second day of the month and asset prices are negative to start December so far.
Yet everything from present to past history suggests the tape will soon reverse.
🚨Full Signal: My new interview with Katie Stockton, Wall Street’s leading technical strategist, airs at 9 AM today — subscribe on YouTube, Spotify, and Apple to tune in.
More than a Santa rally
Stocks almost always go up in December but the current setup favors the bulls more than usual.
Seasonality, sector rotation, and the political cycle all point to an unusually strong probability that stocks finish the year higher.
When the S&P 500 enters December up on the year so far — as it did this week — the index has climbed 81% of the time with an average return of 2.14%, according to an analysis by Bank of America.
When you have the same scenario during the first year of a US presidential cycle, December has been positive 100% of the time across 13 occurrences, with an average gain of 2.03%.
As is, December is the third-strongest month of any year dating back to 1950, with an average return of 1.41%.
November is historically the strongest month of the year, followed by April and December (Chart courtesy of Exhibit A)
Bank of America strategists concluded that eight of eleven S&P 500 sectors typically finish the month higher, with Utilities, Industrials and Financials leading the way.
Tech, notably, is one of the weakest performers in December despite dominating most full-year periods.
Historically, the gains tend to arrive in the second half of the month.
The third and fourth weeks in December carry the highest hit rate across major stock indexes, building the base for the so-called Santa rally and capturing most of the upside.
Macro conditions also support the bulls into the new year.
The US dollar has weakened roughly two-thirds of the time in December, while gold, silver and oil tend to strengthen.
That combination has typically lined up with higher stock prices and greater risk appetite heading into year-end.
To be clear, seasonality isn’t as reliable a forecaster as, say, the fundamentals underpinning stocks at a given moment.
But it does shape probabilities and raise the odds for a self-fulfilling prophecy in markets.
It doesn’t hurt, too, that fundamentals do in fact support the bullish narrative as Opening Bell Daily has documented:
Earnings remain robust
The Fed is set to cut rates with stocks near records
Demand for AI products and infrastructure continues to accelerate
Those tailwinds — paired with a political-cycle backdrop that has never produced a negative December — suggest asset prices have plenty of room to run.
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Market snapshot
Elsewhere
🤝 Goldman Sachs will acquire Innovator Capital Management for $2 billion. The firm supervised roughly $28 billion in assets, and the deal makes Goldman’s asset-management arm a top 10 provider for active ETFs. (WSJ)
🏦Kevin Hassett is the favorite as the next Fed Chair. The National Economic Council director leads prediction markets currently to take over after Jerome Powell’s term ends in May. (CNBC)
🏗 The AI boom has been good for construction workers. The data center buildout has led to pay jumps of 25-30% for workers compared to their previous jobs. Skilled trades workers have suddenly become in high demand. (WSJ)
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Rapid-fire
Synopsys stock rallied 4.8% after Nvidia took a $2 billion stake in the company (Barron’s)
Bitcoin and ether tumbled further as levered positions got liquidated across crypto markets (Yahoo Finance)
Data center energy demand is seen surging 300% the next decade (TechCrunch)
Shopify stock fell 4% as it experienced an hours-long outage on Cyber Monday (CNBC)
Famed short seller Jim Chanos sees risks in the debt market backed by Nvidia’s chips (Yahoo Finance)
Eli Lilly cut its cash prices of single-dose vials of its weight loss drug Zepbound (CNBC)
The Fed could spark two bullish historical data points for stocks (Opening Bell Daily)
Consumers are frustrated yet they shattered Black Friday sales records (Pomp Letter)
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On this day
🗓 December 2, 2001: Enron filed for Chapter 11 bankruptcy in New York, listing roughly $63 billion in assets and becoming the largest US corporate bankruptcy at the time. The move wiped out thousands of jobs.
Last thing
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About me
📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.
I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.
Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].