Image shows a picture of Lindsey Bell, Ally Invest’s chief markets & money strategist. The title reads “Happiest Time of the Year?”

Santa Claus may make the trip to Wall Street this December after all.

The volatility of the past several weeks has many investors concerned they are going to find coal in their stockings this December. You may not believe it, but the S&P 500 is up more than 2% in the month of December so far. And it is less than 1% from an all-time high. The final month of the year has historically been one of the strongest for the stock market. According to the Stock Trader’s Almanac, December is the third best performing month of the year, with the second half of the month being the strongest.

History also shows that stock market strength doesn’t usually end with the holidays and the start of a new year. Investors have typically continued to receive the gift of upside performance through the end of April. In fact, the Stock Trader’s Almanac has called the November through April period “the best six months” of the year. The push for performance at the start of a new year can be attributed to the inflow of cash into the market from several different sources, including bonuses, pension plan investments and IRA contribution deadlines (individuals have until April 15 to max out the previous year’s contribution).

Graph titled Seasonal Strength tracks the annual price performance for the S&P 500 from 2017 through December 15, 2021 with November through December highlighted. The high and low points for each year are as follows: 2017 (December 18 at 20.2% vs. January 3 at 0.8%); 2018 (September 21 at 9.6% vs. December 22 at –12.1%); 2019 (December 28 at 29.2% vs. January 4 at –2.4%); 2020 (December 31 at 16.3% vs. March 23 at –30.7%); 2021 (December 11 at 25.5% vs. January 3 at –1.5%). Source: Ally Invest, S&P Capital IQ

With market seasonality coinciding with the end of the year, it is often a great time to set your investing intentions for the new year. Below is a checklist on how to get your portfolio ready for 2022.

Investor Checklist:

  1. Re-visit your goals. Work, life and society have changed a lot over the past two years. Have your goals changed as well? If your timeline has moved, now might be a good time to reevaluate your financial goals. What better time than the end of the year? Plus, it’s good practice to dedicate some time each year to review where your money is!
  2. Take stock in your portfolio. If you haven’t zoomed out on your portfolio, the end of the year could be a good time to do so. The past year has been better for some stocks and ETFs than others. If you’ve made a killing in one area or lost a killing in another, your portfolio may be a little lopsided. If one investment or one sector/industry is dominating your portfolio, it may be a good time to rebalance. Make sure you’re not holding too much or too little of any investment and that your portfolio matches your appetite and need for risk.
  3. Fight the FOMO. Have a plan in good times and bad. 2021 taught us that there is a risk to staying out of the market: FOMO. There are other risks, too. Some of which aren’t as glamorous. If you were waiting for a 5% or 10% correction this year, you likely missed twelve months of investing and a nearly 25% gain in the S&P 500.
  4. Write your resolutions. Writing down any goals can have a powerful impact on your life and career. Why not do the same when it comes to investing? Do you want to explore a new sector? Try crypto trading? Learn more about the link between the Fed and the markets? There is a way you can invest in these trends. There might be individual stocks, or ETFs and mutual funds that can help. Put a watchlist together and begin monitoring some of these new investment ideas.

The Bottom Line

Seasonality can have an impact on the performance of the market and understanding seasonality can inform when there may be better opportunities to lock in gains or put new money into the market.

Spend the next few weeks going through the checklist above with the near-term seasonality in mind. But remember, historic trends are better off used as a guide and not gospel.

This is the last Weekly Viewpoint of 2021, but we’ll be back with a Q1 Market Outlook at the start of 2022. Happy holidays!

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Speech bubble icon next to text "Expert Take"

Headshot of Lindsey BellLindsey Bell, Ally’s chief markets & money strategist, is an award-winning investment professional with a passion for personal finance and more than 17 years of Wall Street experience. Bell’s unique ability to connect the dots between data and real life and craft bite-sized money ideas that people can use and apply stems from her deep background as an analyst, researcher and portfolio manager at organizations including J.P. Morgan and Deutsche Bank. She is known for demonstrating why and how an understanding of all things money improves a person’s finances and overall well-being. An ongoing CNBC contributor, Bell empowers consumers and investors across all walks of life and frequently shares her insights with the Wall Street Journal, Barron’s, Kiplinger’s, Forbes and Business Insider. She also serves on the board of Better Investing, a non-profit focused on investment education.

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