. In December – typically a strong month for equities - the S&P 500 has so far lost around 6%, weighed down by hefty declines in shares of Tesla Inc,Inc and other names that had led markets higher in previous years. The index is down nearly 20% year-to-date and on track for its worst annual performance since 2008.
The phenomenon has lifted the S&P 500 an average of 1.3% since 1969, according to the Stock Trader’s Almanac. A December without a Santa rally has been followed by a weaker-than-average year, data from LPL Financial going back to 1950 showed. This month’s steep decline underscores how seasonal trends seem to be offset by worries over whether the Federal Reserve’s monetary tightening will plunge the economy into recession.
“The lack of a ‘Santa Claus rally’ this month, with a ‘lump of coal selloff’ in its place, is a troubling sign about 2023 US equity returns,” strategists at DataTrek wrote. U.S. consumer spending barely rose in November, while annual inflation increased at its slowest pace in 13 months, but demand is probably not cooling fast enough to discourage the Fed from driving interest rates higher next year.
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