· Another sign of how strong December tends to be is only once since 1950 has the S&P 500 closed at the end of December beneath the low close of November. The low close in November was on November 4, at 2085.18 (about 4.6% below current levels), so the chances of December closing beneath that level appear to be very slim based on history.
But what if there is a selloff? As Figure 4 shows, when December is red, it is down by only 2.1% on average, the smallest average loss out of all 12 months. Not to mention when it is green, it is up an average of 7.0%—the best performance out of the 12 months.
CONCLUSION
Greenspan’s speech from 20 years ago is a nice reminder to objectively assess fundamentals, valuations, and technicals to make sure the bull case for equities is still valid. Our take is this bull market may be old, but it still has legs. In fact, we continue to expect mid-single digit returns from stocks in 2017, as we recently discussed in our Outlook 2017 Executive Summary.*
*We expect mid-single-digit returns for the S&P 500 in 2017 consistent with historical mid-to-late economic cycle performance. We expect S&P 500 gains to be driven by: 1) a pickup in U.S. economic growth partially due to fiscal stimulus; 2) mid- to high-single-digit earnings gains as corporate America emerges from its year-long earnings recession; 3) an expansion in bank lending; and 4) a stable price-to-earnings ratio (PE) of 18–19.
Thank you to Jeff Buchbinder for his contributions to this report.
Burt White is chief investment officer for LPL Financial.