The market didn't get a "Santa rally" last month... But it doesn't need one. You see, folks typically scan the market for a Santa rally in December.
Editor's note: As you know, stocks have been volatile in recent weeks...
After surging into early December, the S&P 500 Index moved lower to finish out the month. As we've noted here at the Chaikin PowerFeed, it was a sign of caution to kick off 2025.
However, we've also said that we still expect upside for stocks this year. And we aren't alone...
Today, we're sharing an essay on the subject from our friend Chris Igou. He's an editor over at our corporate affiliate Stansberry Research. And this essay most recently published in the January 16 edition of Stansberry's free DailyWealth e-letter.
As Chris explains, history shows that a poor end to the previous year doesn't mean the bull run in stocks is over...
Another Sign Stocks Will Outperform in 2025
By Chris Igou, editor, Stansberry Research
The market didn't get a "Santa rally" last month... But it doesn't need one.
You see, folks typically scan the market for a Santa rally in December.
The exact timing of this rally is debatable. Some people look for it in the days leading up to Christmas. Others highlight the time between Christmas and the new year.
But no matter which time frame you use, no rally took place. The market was flat in the week before Christmas and down 2.6% from Christmas Eve through the end of 2024.
Of course, any lack of a rally feels like bad news that somehow will bleed into 2025 and make stocks suffer. But before you lose hope after a down December, history shows there's reason to be bullish...
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Billionaires Warren Buffett, Stanley Druckenmiller, George Soros, and David Tepper have all sold off massive U.S. stock positions, including shares of Nvidia, Apple, and Bank of America. Billionaire Ray Dalio, who runs one of the world's most successful hedge funds, says, "Things are going to get worse for our economy." What are these billionaires so worried about? Click here to see why experts and insiders may be preparing for the biggest financial crisis of the last 200 years.
To see whether the missing Santa rally matters, I looked at the market's performance since 1950. And I tested what happens to stocks after a losing month in December.
The first thing to note is that stocks typically end the year on a high note. Out of 74 years, only 19 Decembers were losers. And this latest December drop was the first since 2022. Before that, you'd have to go back to 2018.
Stocks soared after both of those years. The 2018 case led to a 28.9% gain in 2019... And the 2022 instance led to a 24.2% gain in 2023.
Those are just the two most recent cases – and they were both big winners. But we didn't just observe this kind of success in recent years. When we look at the whole body of cases, outperformance shows up across the board...
If you've owned stocks since 1950, you've done incredibly well. The S&P 500 Index is up 8.1% a year since then. But buying after a down December beats that in every period we tested...
Similar cases led to gains of 1.7% in one month, 3.7% in three months, 5.2% in six months, and 9% in a year.
We also saw solid win rates. Stocks were up over the next six months 68% of the time. And that success rate shot up to 79% for the one-year period.
In short, stocks did better than a benchmark strategy across the board after losing out in December. And the odds of success were high. But we can take this one step further...
The 9% gain over the next year is a base case. However, what that number doesn't show is that 10 of the 19 cases led to double-digit gains. And seven of them led to 20%-plus gains over the next year.
As you can see, a poor end to 2024 isn't a death sentence. Don't let the recent struggles lead you to think this bull market is taking a turn.
Sure, there will be corrections and pullbacks along the way. But as of now, 74 years of data show that owning stocks today is still a good idea.
Good investing,
Chris Igou Editor's note: To receive insights like this on a regular basis, consider signing up directly for the DailyWealth e-letter. In it, you'll get coverage of the day-to-day opportunities that the team sees in the markets. And you'll get ideas on how to safely – and steadily – build a lifetime of wealth.
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are somewhat Bearish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Energy
+6.3%
Financial
+6.15%
Materials
+6.04%
Industrials
+4.89%
Real Estate
+4.85%
Utilities
+4.31%
Discretionary
+3.8%
Information Technology
+2.33%
Communication
+1.65%
Staples
+1.18%
Health Care
+0.39%
* * * *
Industry Focus
Oil & Gas Exploration & Production Services
2
43
8
Over the past 6 months, the Oil & Gas Exploration & Production subsector (XOP) has underperformed the S&P 500 by -9.19%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #17 of 21 subsectors and has moved down 4 slots over the past week.
Indicative Stocks
VNOM
Viper Energy, Inc.
FANG
Diamondback Energy,
OXY
Occidental Petroleum
* * * *
Top Movers
Gainers
INTC
+9.25%
SLB
+6.06%
TFC
+5.94%
MPWR
+4.89%
DE
+3.72%
Losers
JBHT
-7.38%
LLY
-4.21%
FICO
-3.51%
WBA
-3.17%
APA
-2.98%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
COF, UAL
DHI, FITB, GE, KEY, PCAR
NFLX, STX
PLD
No earnings reporting today.
Earnings Surprises
RF Regions Financial Corporation
Q4
$0.59
Beat by $0.04
STT State Street Corporation
Q4
$2.60
Beat by $0.16
FAST Fastenal Company
Q4
$0.46
Missed by $-0.02
TFC Truist Financial Corporation
Q4
$0.91
Beat by $0.03
HBAN Huntington Bancshares Incorporated
Q4
$0.33
Beat by $0.01
* * * *
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