EB Seasonality Report - December 2022
A Look Back At November Stocks:
One month ago, we provided a list of the Top 20 stocks that had strong historical track records during the month of November. Here are how they performed in November 2022:
The percentages represent the returns from the October 31st close to the November 30th close. The average performance of +11.15% was significantly higher than both the NASDAQ 100's (QQQ) November performance of +5.54% and the S&P 500's (SPY) November performance of +5.56%. It was a very strong month for our November seasonality stocks. Clearly, TSLA was one exception. But seeing 11 of our stocks with double digit % gains, all more than double the return of the QQQ and SPY, was nice.
The second best performer was X, which jumped an impressive 29%, but now appears to be testing a critical price resistance level:
X benefited from both strong seasonal tailwinds and a strong steel group ($DJUSST).
S&P 500 December Performance
Here's a breakdown of the annualized performance of the S&P 500 (since 1950) during the month of December:
- December 1-8: +21.14%
- December 9-15: -17.96%
- December 16-18: +55.35%
- December 19-20: -17.34%
- December 21-31: +40.52%
December is a part of the most bullish period of the year - from the close on October 27th through the close on January 18th. December has risen 54 of the last 72 years, which is the highest percentage (75%) of any calendar month. Also, December's annualized return since 1950 of 18.62% is more than double the average annual return on the S&P 500 over the same period. December ranks #2 among all calendar months in terms of annualized return, trailing only November.
The second half of December has clearly been the better performing half of the month. Here's the annualized performance breakdown between the first and second halves of the month:
- December 1-15: +2.82%
- December 16-31: +35.68%
Sector Performance
Before we look at individual stocks, let's get an overview of how the various sectors and industries have performed during December (and January) over the past decade (during this secular bull market):
Sector Heat Map:
The numbers reflect how much a sector, on average, outperforms or underperforms the S&P 500 over the past 10 years. The dark green-shaded areas show significant outperformance (1.0 or greater). The light green-shaded areas show solid outperformance (from 0.5 to 1.0). The yellow-shaded areas show underperformance (-0.5 to -1.0). The red-shaded areas show significant underperformance (-1.0 or greater). Where there is no shading, there tends to be more neutral performance (-0.4 to 0.4).
It seems fairly clear to me that aggressive sectors tend to "go along for the ride" during December, before crushing the S&P 500 in January. Financials (XLF) show leadership during December, but that quickly evaporates in January. Real estate (XLRE) is the group that really seems to love the month of December.....and January too, so let's focus on this sector:
Real estate has averaged outperforming the S&P 500 in only four calendar months and the only 2 consecutive months of outperformance are December and January. If interest rates do continue declining, that could certainly be a tailwind for this sector. After breaking out above 39 price resistance, I see a first advance to 41 where the XLRE will encounter both price and channel resistance.
Industry Performance
Let's take a look at the industry heat map within real estate (XLRE) to drill down to the best seasonal strength in December and January over the past decade among the various industry groups (relative to the S&P 500):
Real estate (XLRE):
As you can see, there tends to be widespread relative strength in December among the various industry groups within real estate and that strength seems to mostly accelerate in January.
Here are industry groups (within sectors other than real estate) that tend to perform much better than the benchmark S&P 500 during December:
Technology (XLK):
- renewable energy, telecom equipment
Consumer Discretionary (XLY):
- hotels, recreational services, automobiles
Communication Services (XLC):
- none
Industrials (XLI):
- industrial suppliers
Financials (XLF):
- investment services, consumer finance
Health care (XLV):
- none
Consumer staples (XLP):
- tires, nondurable household products
Utilities (XLU):
- water
Energy (XLE):
- coal
Materials (XLB):
- aluminum, gold mining, mining, nonferrous metals
Stocks for November
We've selected our Top 20 seasonal stocks for December from the S&P 500, NASDAQ 100, S&P 400 Mid Cap, and S&P 600 Small Cap (latter two were added to our research platform two months ago). Several names represent sectors and industry groups that have been discussed above. Others simply stand out in December based on their own historical track record.
The stocks this month are as follows:
The 3 columns to the far right are as follows:
- Whether the stock is a small, mid, or large cap stock
- The % of the stock climbing in December over the past two decades; for instance, PLAB has ended December higher than it began 60% of all Decembers over the past 20 years
- The average December return over the past two decades; for instance, PLAB's average December return has been 22.20% over the past 20 years
A "Seasonality - December 2022" ChartList (annotated with 1 or 2 support levels to watch) will be created today and will be available for viewing/download on our website this afternoon (most likely). You must be a StockCharts.com Extra or Pro member to download our ChartLists. Basic members and non-StockCharts.com members can view the charts one at a time.
Happy trading!
Tom