Is a strong year-end rally a portent for returns in the new year that follows? Ryan Detrick, Chief Market Strategist at LPL Financial, says the results of his study of the question could have “bulls smiling” in 2021. Detrick said a 10% or greater gain in the final two months of the year, which since World War II has occurred 5 times prior to this year, has led to a higher S&P 500 the following year each and every time. Detrick concluded his study with “Once again, strong returns are the playbook historically,” The chart below (the gold line) shows what a year typically looks like after a 10% or more prior-year November/December rally, compared to an “average” S&P 500 return (the green line). (Chart from LPL Financial)
Strong Year-End Rally
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January 11, 2021