Thanksgiving Week Stock Trends: A Historical Perspective on S&P 500 Performance

As the holiday season approaches, investors are keenly aware of the patterns that influence stock market performance. According to a recent report by BofA Global Research, the S&P 500 tends to exhibit promising returns during Thanksgiving week, particularly in years following presidential elections. In this article, we delve into the historical performance of the S&P 500 during this festive week and examine the potential implications for investors as they approach the year-end market.

Thanksgiving Week: A Period of Optimism

Stephen Suttmeier, a technical research strategist at BofA, remarked in a recent note that “seasonality suggests that Thanksgiving week can be a strong week” for U.S. stocks. It’s noteworthy that this week is not just a time for family gatherings and feasting; historically, it has been characterized by a solid uptick in stock prices. The S&P 500, measuring the performance of the 500 largest publicly traded companies in the U.S., has climbed more than 4% throughout November as of early Monday afternoon trading, indicating a robust market sentiment as the holiday nears.

Statistically, the S&P 500 has seen positive movement during Thanksgiving week, trading higher roughly 60% of the time on average, with returns of 0.28% and a median gain of 0.46% dating back to 1928. Particularly intriguing is the performance during presidential election years, where the index has risen 75% of the time, boasting an average return of 0.88% and a median gain of 1.08%. This data presents a compelling case for investors to maintain a bullish outlook during this festive season.

The Post-Thanksgiving Dip: An Opportunity?

However, Suttmeier notes a pattern of “digestion” often seen in the week following Thanksgiving. Historically, the S&P 500 tends to see a dip, showing losses 67% of the time on average, with an average loss of 1.12%. Despite this setback, the drop may often serve as a precursor to a significant end-of-year rally. Suttmeier suggests that investors may want to consider this dip as a buying opportunity.

Year-End Rally: A Historical Trend

The strong performance from Thanksgiving through New Year’s Eve, especially in presidential election years, provides a strong incentive to invest following the traditional post-Thanksgiving decline. According to Suttmeier’s findings, buying during this period has yielded positive outcomes, with a return of 1.38% and a median gain of 1.60% observed in such years.

A Promising Year 2024

The stock market in 2024 has already seen a notable rally, with the S&P 500 soaring approximately 25% as of Monday afternoon according to FactSet data. As we seek to analyze the conditions of year-end trading, it’s observed that the median gain for the last week of November is nearly double the historical average for one-week periods since 1945. Nevertheless, when the year-to-date gain exceeds 20%, the median return is more aligned with historical averages, landing at about 0.19%.

Economic Factors at Play

The economic and earnings calendars are relatively light during the Thanksgiving week, with expectations of busier trading sessions ahead. Investors will be watching closely as Tuesday brings a slew of earnings reports, followed by Wednesday’s more prominent economic data releases; all essential for gauging the market’s outlook ahead of the extended weekend.

Conclusion

In summary, the historical performance of the S&P 500 during Thanksgiving week and into the end of the year reveals notable trends that investors should consider. With positive returns typically observed during this festive period, especially following a presidential election, investors may find value in purchasing dips that occur post-Thanksgiving. As we move deeper into the holiday season, keeping an eye on economic indicators and earnings reports will be crucial to navigating the stock market during this transformative time.

For those interested in maximizing their investment strategies, understanding the seasonality of stock performance can offer invaluable insights. As history has shown, Thanksgiving week may be a herald of significant opportunities as the market heads toward a potential year-end rally.