Stock Market Behavior During the Holidays

November 10, 2014 Updated: April 23, 2016

Even weeks before Thanksgiving, it’s safe to say that Christmas is in the air. All you have to do is walk into a store before you see its tinsel-y footprints everywhere: wrapping paper, music with prominent jungle bells, eggnog. The season is fast approaching and there’s nothing you can do about it. Because of the holiday’s stranglehold on North America, there are certain cultural behaviors that are predictable, even regarding the American stock market.


Now, I would never advise a reader to jump into stock trading hoping to make a buck in just a few days or weeks, but I suppose it it technically possible. While stock trading gains are usually a long-haul process, certain stocks tend to do better in December than in any other time of the year. These are: Retail (big box and online), Shipping and Delivery, and Credit Services. None of these should be surprising to anyone familiar with holiday travel, gift-giving, or the writers of top finance blogs.


Since 1990, the S&P index has yielded gains in the month of December about 82% of the time. That’s far better than any other month, with average gains of about 1.35%. What month is the worst for the market? September. No doubt because of the anticipation of future holiday expenditures, consumers spend less in the month of September, and the effect is felt nationwide, at least to those who analyze the data.


Holiday market gains can be an encouragement for investors who are feeling the holiday pinch in their personal expenditures. While buying gifts, traveling, partying, and decorating all take their toll on a bank account, in a way they are all feeding the growth of an individual investor’s portfolio. By feeding into the economy, investors simultaneously benefit from it, if in only a small way.


With this sort of thinking inhabiting headlines across the nation, the long term investor should not worry too much about holiday market behavior. For generations, the American stock market has demonstrated overall growth, despite near constant peaks and valleys along the way. Even after terrible declines like the crisis of 2008, the market always finds a way to rebound and better its highest performance of years past. For this reason, investors are best served buying generalized mutual funds, representing ownership of hundreds of stocks. Because of the net yield of this entire mass of funds, viewed at a distance and over a long period of time, the investor yields much more benefit from a “set it and forget it” approach, rather that trying to cherry-pick the behavior of one stock or the other.


Still, it can be tempting in and around the holidays to invest in industries that pick up in December. In the opinion of this author, one would be prudent to look to the consolidation of retail markets into the digital/mobile realm. Giants like Amazon seem only to be getting larger, while other digital retailers are emerging to pluck market share away from traditional big box retailers. With the recent demise of former monoliths like Circuit City, this seems but a foregone conclusion.