S&P 500 Thanksgiving to Yearend Rally
By: Christopher Mistal
November 17, 2015
Historically, this week, the week before Thanksgiving has been a bullish week. DJIA has recorded a full-week gain during November options expiration week in 16 of the last 21 years. This strength typically extends into the days around Thanksgiving then from Thanksgiving to yearend as holiday cheer, yearend bonuses, dividends, buybacks, etc., usually fuel the markets move higher. However, as of yesterday’s close, the S&P 500 was down 0.28% year-to-date. This is well below the average pre-election election or 7th Year of presidential terms historical performance and an outlier even when all years since 1950 are considered.
Prior to this year, the S&P 500 was down for the year just 22 times in the last 65 years on the day before Thanksgiving. Given today’s trading and the limited number of days till Thanksgiving, there is a distinct possibility that 2015 could be the 23rd year to still be negative for the year on the day before Thanksgiving. In the last 65 years, S&P 500 has averaged a 1.98% gain from Thanksgiving to yearend with a record of 46 advances and 19 declines. From the close on the day after Thanksgiving to yearend, the record is slightly softer with an average move of 1.62% (44 up and 21 down).
Splitting the last 65 years of data based upon year-to-date performance on the day before Thanksgiving revealed a softer Thanksgiving to yearend rally when the S&P 500 was negative year-to-date and the frequency of gains declined to just 14 times in 22 years. Here again, using the close on Friday, the day after Thanksgiving to yearend the record weakened further.
[Down Year-to-Date Table]
In this next table, positive year-to-date-on-the-day-before-Thanksgiving years appear. In this scenario we see the average Thanksgiving to yearend rally appear more frequently and with a greater average gain of 2.05%. Removing the day after Thanksgiving has little impact as the average move holds up and frequency of gains does not change.
[Up Year-to-Date Table]
This last scenario is the most interesting and the most likely outcome for S&P 500 this year. In this table flat year-to-date, defined as S&P 500 down less than 5% or up less than 5%, appear. In these 10 previous years, only in 2005 did S&P 500 fail to rally from Thanksgiving to yearend while the average in all 10 years was 3.12%. Although there is no guarantee that 2015 will finish the year in a similar manner, it is encouraging to see that traders and investors did succumb to past holiday cheer to push S&P 500 higher even after 11 months of flat returns.
[Flat Year-to-Date Table]