November 30, 2012 The Outlook for December
With the capital tax rate on the front burner of the fiscal cliff debate, the usual apprehension of tax motivated selling in December should escalate. That the S&P500 has gained almost 11 percent so far this year can only swell that angst. Indeed this years January-November performance ranks third, behind only the 18 and 16 percent gains of 2009 and 2003, in this century.
Yet prices continued higher in those final months, adding five percent in 2003 and almost two percent in 2009 between the end of November and the years final day of trading.
Whereas the January-November record divides almost equally between gains and losses seven increases and six decreases since 2000- prices moved higher nine times in those years final month. The S&P500 fell only once, and that was by .1 percent in 2005, after the S&P500 rose 3.94 percent between January and November.
In sum, December prices declined in only three of the last twelve years whereas they moved higher nine times. One could argue of course that tax inspired selling hindered the market, and that could be true; but it is far from demonstrating price declines in the years final month. That just did not happen.