Worst December Start Since 1931? Not quite

Don FishbackStock MarketLeave a Comment

It’s been a rough start to the month (unless you’re a subscriber to our Three Easy Factors service).

As bad as it’s been, there have been some misleading stats bandied about by click-bait headline grabbers that make it seem worse than it is.

Several news outlets are proclaiming that the stock market’s performance in December is the worst since 1931. But what the reporters and their sources fail to tell you is that the historical monthly performance measurements they use for comparison purposes is the net change for the entire month of December.

For instance, in 1941, the S&P Index (it wasn’t the S&P 500 yet) closed at 9.10 on November 29, 1941. A few days later, Pearl Harbor was attacked and the stock market got blistered. The S&P Index to 8.68 kept falling the most of the rest of December, falling all the way down to 8.37. That’s a decline of -8.02%. But the month wasn’t over. The last week of the year the market rallied and the index ended the month down -4.51%.

So, given the fact that we still have about half the month left, which figure do you think is most applicable for comparison purposes? The -8.02% or the -4.51%?

The media is using the -4.51%, even though it represents the performance from the end of November to the end of December, with no data or performance measure indicating what happened in between those two dates.

I think that’s flawed, which is why I spent a bit of time building a spreadsheet (because that’s what I do) that compares what has happened thus far in December to maximum drawdowns in prior Decembers.

It’s still not a perfect comparison. The best would look at the performance of the first 11 days of trading [even then you’d have to deal with weekend trading in early periods]. But gives you a much better idea of how this weak start really stacks up.