Thanksgiving Week: A Strong Period for the S&P 500 and Year-End Rally Prospects

As we approach the Thanksgiving holiday and the new year, it’s important to look at historical performance patterns of the S&P 500 that may shape our investment strategies as 2024 unfolds. According to a recent report from BofA Global Research, the prevailing market sentiment underlines a period of optimism that investors should not ignore. Specifically, Thanksgiving week can yield solid returns, particularly in presidential election years.

Historical Trends and Thanksgiving Performance

Stephen Suttmeier, a technical research strategist at BofA, pointed out that stocks tend to perform well during Thanksgiving week based on historical data dating back to 1928. The S&P 500 has recorded gains in approximately 60% of those Thanksgivings, averaging a return of 0.28% and a median gain of 0.46%. Notably, the performance is even stronger during presidential election years—indicating that tradition favors robust investment behavior during this period.

In presidential election years, the S&P 500 has experienced a notable uptick, rising 75% of the time with an average return of 0.88% and a median gain of 1.08%. This data gives us a solid foundation for why we should expect strong performance as we rally towards year-end.

Post-Thanksgiving Trends: The Dip and Expected Rip

The week following Thanksgiving historically presents a reverse trend, as the market often sees a bit of a dip. In fact, Suttmeier notes that during presidential election years, the S&P 500 has declined 67% of the time after Thanksgiving, averaging a loss of 1.12% and a median decline of 0.68%. However, this dip should be viewed as an opportunity rather than a risk. Historical patterns suggest that buying during this post-Thanksgiving lull leads to significant gains going into year-end, with returns averaging 1.38% and a median gain of 1.60%

This is a time where investors may want to “buy the dip,” seizing the opportunity to accumulate positions before a potential market rally. The belief that the market typically rebounds strongly from declines during this period provides an enticing incentive for conservative investors to bolster their portfolios heading into the new year.

Market Conditions Heading into Thanksgiving 2024

As of Monday afternoon, the S&P 500 was trading around 5,967, just below its recent record closing high of 6,001.35. Despite mixed results across major index benchmarks, the context remains positive. November has already shown robust performance, with the index rising more than 4% for the month, largely propelled by a rally following Donald Trump’s election victory on November 5th.

With the U.S. economy showing resilience and the stock market up around 25% year-to-date, one must consider the implications of these figures. While some caution may arise due to potential short-term volatility in the post-Thanksgiving period, history tells us that such pauses are temporary and often presage more significant gains.

A Cautious Yet Optimistic Approach

Despite some minor fluctuations in trading this week, including a less than 0.1% decline in the S&P 500, history supports a bullish outlook as we prepare for the end of the year. As economic data is released and earnings reports come in this week, any potential volatility should be taken in stride, and investors should stay focused on the long-term picture.

With light economic and earnings calendars, Tuesday and Wednesday will be crucial for outlooks, making it an opportune time for prudent investors to reassess their strategies. Long-term, we should remain optimistic about the market’s trajectory, especially in the face of significant gains observed this year and historically favorable patterns going into the holiday season.

Conclusion: Take Advantage of Seasonal Trends

The historical performance of the S&P 500 during the Thanksgiving week and into New Year’s Eve provides both insight and a solid investment strategy moving forward. By recognizing these seasonal trends, investors can make informed decisions that align with traditional financial principles—ultimately setting themselves up for success as we close out 2024 and look ahead to future opportunities.