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Investors may enjoy some holiday cheer, if long-running seasonal patterns repeat themselves this year. Research indicates that December tends to be the best month for stocks, while the best three-month period is the one from November through January, Barron's reports.

Meanwhile, another body of research cited by Barron's finds that value stocks tend to outperform growth stocks in December, and utility stocks, the traditional safe haven for conservative investors, typically perform best of all.

Investors in high-flying tech stocks should note that this sector historically has done the worst in December, per the same sources. Additionally, there is the phenomenon of the "Santa Claus rally" that typically marks the period from late December through early January. (For more, see also: Why the 'Santa Claus' Stock Rally Is at Risk.)

For the year-to-date through November 30, the S&P 500 is up 18.3%, the Dow Jones Industrials are up 22.8%, and the Nasdaq Composite is up 27.7%.

Decembers to Remember

Looking at data from 1950 onwards, the Stock Trader's Almanac has found that the S&P 500 Index (SPX) was up in 49 Decembers and down 17 times, per Barron's, with an average gain of 1.6%, the best for any month. The scorecard for the Dow Jones Industrial Average (DJIA) was quite similar: up 46 times, down 20 times, and an average gain also of 1.6%.

With the Nasdaq Composite Index (IXIC), since its inception in 1971, December has been its second-best month on average, up 26 times and down 19 times. The Russell 2000 Index (RUT) has an even shorter history, but has been up 29 times and down only 8 times, for an even better winning percentage than the S&P 500, up in 78% of Decembers versus 74%. The Russell also has a significantly better average gain in December of 2.6%, per Barron's.

Bianco Research has examined data since 1981, finding that December also has been the best month for the S&P 500 during that period, per Barron's. Moreover, Bianco computed an average December gain of 1.62% that is virtually identical to what the Stock Trader's Almanac found over a much longer study period.  

Bianco also studied the behavior of S&P 500 growth and value stocks in December, finding average gains of 1.63% and 2.41%, respectively. Utilities lead the pack, with an average December gain of 2.88%, while tech stocks are at the bottom, with an average gain of only 0.66%, per Bianco as cited by Barron's.

The Best Quarter

While not a calendar quarter, the three-month period from November through January leads all other three-month periods, per the Stock Trader's Almanac, as reported by Barron's. The average gain during this time frame has been 4%, they say, with only four instances of losses from 1930 onwards, all of which were in the midst of bear markets: 1931-32, 1940-41, 1969-70, and 2007-08.

The longtime editors of the Almanac, Yale Hirsch and his son Jeffrey, have speculated that trading activity by pension funds may be a large factor in this seasonal trend, Barron's says. In line with this theory, Barron's notes that other market observers have found that mutual funds tend to complete their tax-loss selling by the end of October, removing this potential source of selling pressure in the later months.

After Christmas Sales

Thrifty consumers often wait for after-Christmas sales to scoop up bargains. Similarly, investors might consider rummaging through the lists of beaten-down stocks, especially those further marked down by year-end tax-loss selling, to find potential bargains that might rebound in 2018. (For more, see also: 7 Battered Stocks Set to Rebound in 2018.)

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