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Why A Year-End Rally Bodes Well For 2021

Why A Year-End Rally Bodes Well For 2021

December 31, 2020
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Welcome to the last day of 2020! It has been a devastating year in so many ways, yet for investors it has been quite rewarding. Much of the gains in 2020 have taken place the final two months, with the S&P 500 Index up more than 14% in November and December so far, the best end to a year since WWII.

A big end of year rally could have bulls smiling in 2021. “Turns out a 10% or more gain the final two months of the year has equaled a higher S&P 500 the following year every single time since World War II,” explained LPL Financial Chief Market Strategist Ryan Detrick. “In fact, January was also higher every single time as well, so maybe this strong rally to end the year is a clue for higher prices into next year.”

As shown in the LPL Chart of the Day, the S&P 500 gained an average of more than 18% the year following a 10% or more surge during the final two months of the year. Meanwhile, January was up 5 for 5 as well, rising an impressive 3% on average.

View enlarged chart.

Here’s what the average year looks like after the prior year gains 10% or more the final two months compared to a typical year. Once again, strong returns are the playbook historically.

 

View enlarged chart.

We wish everyone a happy and safe New Years Eve and we’ll see you in 2021!

 

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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. All index and market data from FactSet and MarketWatch. This Research material was prepared by LPL Financial, LLC. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

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