Market Update - December

In this episode I give you my take on what is happening in the stock market. We discuss what's next after that November rally, Santa Claus Rallly's and what the election year can bring to the market. 

Remember - past performance can't predict future results, but looking at historical markets can give us an idea of what to possibly expect. 

You can see the charts here: https://www.canva.com/design/DAFoQZKrxGk/lxJ4A0k0O-Dm3-5_1fXQ8w/view?utm_content=DAFoQZKrxGk&utm_campaign=designshare&utm_medium=link&utm_source=publishsharelink

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Transcript

00:00 Hey everyone thanks for joining this market update. This is being recorded as December 7th, and just want to take a look at just what's been going on in the market, give you guys an understanding of everything going on, obviously keep you informed.

00:17 We didn't get around to doing this in November, so this one is a little bit late, but November has a lot to talk about, so that makes it, that makes it a positive thing to talk about, which is nice.

00:27 So who is SELA? SELA was found in 2019 with the Goal of Brain Confidence Organization to People's Financial Life Through Education, Stewardship, and Power and Wise Decision Making.

00:36 Holistic wealth management and planning firm located in California, but serving clients nationwide. So if you have more questions after this call, at the very end, there's going to be a screen that kind of gives you other ways to contact me.

00:50 If you have any further questions about any of the content we've gone over or just for yourself and your planning, please don't hesitate to reach out and let me know, but let's get into it.

01:01 So this is what we're going over today. This is going to be probably a quicker video than last couple months again, positive things to talk about, which makes it a little bit easier, but so we're going to do a quick look.

01:13 That's where we always start. Just where we are, what the, you know, where the market is for a year to date kind of some what.

01:21 What's next information as far as what are some other things that we're looking 
at now after that rally in November what are we looking at moving forward?

01:28 And then we're going to talk about a Santa Claus rally and what that means seasonality. Is that coming? And then just the presidential cycle and what that could.

01:37 Mean for this full market. So that is what we were going over today. So here's the quick look. Like I said, these are, this is as of December, sorry, last Friday.

01:48 So that makes it December 1st. This week in the market, it's been pretty back and forth. So. It's going to be pretty close to these numbers.

01:55 It's not going to be too far off. But you see that the S and P has had a year to date gain of 21.49% right here.

02:06 And the NASDAQ year to date gain. Of 37.77% as of last Friday. You see a nice big one month really across the board in each of these indexes.

02:20 And then you look down here and you're like, okay, so what are the sectors that have done well? Same ones we've been talking about most of the year.

02:25 Information technology now hitting 52.28% on the year. And communication services. Sorry for that typo right there. Here's the number right here.

02:36 48.32%. That was last month. So that did not get updated. So. Again, just to reiterate, and I've said it in previous market updates, but if you haven't listened, the NASDAQ is heavy tech, which is why you see such a large number there on the year.

02:52 And so you see information technology here has done really well this year. And then specifically lately has had a very large rally due to AI.

03:01 And so that is where you're getting those higher numbers there. The nice thing on this quick look, finally, I feel like is that you finally have the Dow catching up or at least waking up.

03:14 On the year that has been relatively flat. If you look back at past quick looks for 2023 and you finally see some movement there, which is, is nice to see that the full market is starting to catch up and that's what we're going to look at a little bit later.

03:29 Maybe it's the next screen actually, but it's going to, it's more across the board for a little while. We were just getting tech and a few different sectors, which is why most, you know, most of the games have been in the S and P or in the NASDAQ, but now you see the Dow has starting to move, which means

03:46 that we have more sectors getting involved here in these positive gains. So that is positive news overall. Yeah, so here's kind of what I was talking about this next slide of looking at what's next.

03:58 So right now we have the S and P is sitting pretty much at those. So when you look at stocks, when people analyze stocks, you have fundamental analysis and you have technical analysis.

04:12 Fundamental analysis means you're looking at the balance sheets, you're looking at year over year growth, you're looking at their numbers.

04:19 Technical analysis is looking at the charts. So this is what this is here as we're looking at the charts and just the patterns in the chart.

04:29 The high of July in S&P 500 automatically is, it's now a resistance to the S&P. Meaning, you know, it's kind of like a barrier that we're they're going to bounce off of it and go back down.

04:44 Or if we can break through it, it becomes a pretty bullish signal for the market. And the reason is it's just because when you reach that high and then it kind of, you know, the market kind of peters out and goes back down and, and kind of does the stuff down here before it goes back up to that high.

04:59 Again, it just provides that resistance against it. Of showing that was the last high. Can we make a new high?

05:06 And once it closes, it has to close. You can have, it will go make touch above it during intraday trading trading.

05:13 But if you get a close above that 4,600 level for the S&P, then we have broken through resistance. And that would be a very bullish signal, meaning that we think the market's going to keep going.

05:23 Up from there and we'll set a new high. Once we do that, then that resistance actually now becomes support. And so you might see that as the market's volatile, once we break through that market, reach a new high, come back down that, that July, that level becomes support.

05:39 For it to bounce back off, you know, before going back up again. So that's kind of how technical analysis work and that, that's what this is showing you.

05:46 And you've seen that actually all this week, we're just kind of, you know, in this circular motion right below that 4 to 600 level I think today I saw it was like, before getting on this call, it was like 45, 84, somewhere in that range.

06:00 So I've just seen this right basically at that range of resistance. So that's what we're watching. We're watching for that breakthrough of that resist of that high, previous high.

06:10 This here is, It's something called an advanced decline line which is a formula that is used to show how many stocks on the market are going down versus going up.
06:23 So it has this formula behind it. But when you see these big, creases, that is showing you that more stocks are going up than stocks are going down.

06:34 So like sometimes in the market, maybe the market's up, but it's only a few companies that are really pulling a lot of the market up, especially if the market, those companies have large capitalization.

06:43 Very large companies and they can kind of drag the market up because they have such big highs. Market breath is Brett is, it's across the board.

06:53 Are you seeing green across the board and multiple companies and multiple sectors. And we're finally, like I said, getting that we finally got.

06:59 That in November. So that shows a lot more overall health in the latest rally in November. So that is a good thing.

07:07 But same, you're, you're seeing a resistance line here in this chart matching this resistance line here. So again, looking through that breakthrough of that resistance.

07:16 But this is a very good sign for just overall health in that, that latest rally in November. So it then goes into, okay, so the Santa Claus rally what does that mean?

07:35 What is the seasonality around December? So you can see in this chart here, this is kind of showing you every single month and the percentage of positive monthly returns in those months in this chart dating back to 19.

07:48 50. The best month on this chart is December. So December is, has the highest proportion of positive monthly returns, which 74% since 1950.

08:01 So that's, you know, that Santa Claus rally, but something to note. Is that the stronger returns in December are are normally delivered.

08:09 They normally happen in the second half of the month, not the first half of the month. And so, you know, that's kind of what we're watching.

08:14 Or will we get a Santa Claus rally this year? Because if you look at this chart on this next page, we actually have not gotten that in racing years.

08:24 And so, you know, it's like, well, we get that this year. I'm not really sure because we in the past five years in December, we have had negative returns and also the past 10 years.

08:35 So December hasn't been a great month for us. A lot of this is drawn down because I think it was, yeah, 2018, December had like a 9% drop that year and closed at a low.

08:48 So that is dragging that down quite a bit from 2018. But December's haven't been great recently. So we're not, you know, that hasn't been a guarantee in that Santa Claus rally.

09:00 So we're waiting to see. You can see in this chart here though that November is a very strong month also in the last five years.

09:09 And that was true again this year. With this November, we had a 9% gain and this November ranks 18th best overall month period since 1950 and the fourth best month in the past 10 years.

09:25 So, the rally last month was a very nice rally and definitely, you know, hits some kind of higher historical numbers than even what we have been getting in November's, but we've had some pretty strong November's, especially as of recently.

09:44 So then it goes into looking into, okay, so seasonality, we'll see, we'll see about 
that Santa Claus rally, maybe we got it all in November we'll see.

09:53 But then looking to 2024, the biggest question that I'm getting from clients is what about the election year? What's going to happen this election year?

10:04 What does that mean for stocks? I think this chart was helpful because it showed you that here's year one. So this is the S&P 500 index returns based on the four year presidential cycle.

10:21 You have year one, year two, year three, and year four. So your reelected president in year one, year two, year three, year four, your new president in each of those years and the average year between the two.

10:34 Okay. So here's looking at year four. That's what we're going into. We're going to year four of a presidential cycle, which is always an election year.

10:40 Regardless of who has been in the white house or who will be in the white house in 2025, year four of an election cycle has brought an average of a 7% gain in that year 
four during the election year.

10:55 Now that is a big drop off from year three when you give, have an average of almost 17%. But this is not normally negative.

11:05 This is still normally positive. And so maybe that can help kind of calm, calm some fears that this election season is going to completely derail the bull market.

11:15 While election season seasons are volatile. More volatile, that part, we won't be able to get around. Hopefully we still have again, on the year and that historically that has shown us that's where we've been.

11:30 Now I do think that the market is looking at more than just the election year. There are just more things in focus and you know what those are because we've been talking about them.

11:38 So the recession and inflation and interest rates still being the main thing. But you know, the presidential cycle will play an effective.

11:51 And then we're going to keep discussing this as the year unfolds because there's actually a lot of really interesting data surrounding the market and when the markets down and who's normally elected or if the market's up at a certain time who's normally elected.

12:03 So we'll kind of continue to discuss that information and. Again, it's all just information that the market has. It doesn't necessarily mean you know, what will happen, but it's kind of interesting to talk about and see, and then just a couple of year and reminders for you as we're getting closing in

12:21 on 2020. The end of 2023, these are things that have to be done in 2023 for your taxes and you know, just before a year end.

12:32 So if you wanted to do any Roth conversions, if there was a time that made sense for you to do a proportion convert from your Roth to a, I'm sorry, from a traditional IRA or 401k into a Roth, that needs to be done.

12:46 If you want it for 2023, that would need to be done before your end for your taxes. So that would be something to consider tax loss harvesting for offsetting any capital gains.

12:54 That you may have would need to be done before 2020, the end of 2023. And you can take, you can claim up to $3,000 of losses, but you can use any of those losses to offsets and in gains you may already have.

13:06 If you have some funds that are still not doing great in your portfolio. Obviously you're in charitable giving that one.

13:13 Most people know that's an obvious one. If you have an HSA finishing your contributions to your HSA and maxing that out maxing out your 401k in any annual gifting, this is not charitable giving, this is annual gifting as like wealth transfer.

13:27 So if you're gifting to a beneficiary for like inheritance that you want to, you can do up to 17,000 per individual, per person so per like, if there's a spouse you can do 17, your spouse can do 17 per each individual without increase.

13:43 So if you are in the wealth transfer stage, that's something to consider. And then RMD, not something to consider, something to make sure you did.

13:52 If you are required to take a distribution from your retirement accounts, if you're at that age, you need to make sure you took your full distribution.

13:59 So you don't get penalized. So those are just your year end reminders of things to maybe check through and see if these need to be done or make sense for you to do before the year is over.

14:11 So that's all I have for you today. A little, like I said, a little shorter, sweeter. Better news to talk about.

14:18 So makes it nice. Here's some information about LPL. And here is some more disclosures from LPL. And then like I said, here's this page.

14:29 If you have need to contact me. I have any questions or just other ways to continue to stay educated and involved with SELA.

14:38 And if you are listening to this on the podcast, I will make sure to put this presentation so you can see all those charts.

14:45 As you're listening, those will be in there. And thank you so much and we will see you guys next time.