BofA on S&P 500: Post-Thanksgiving dip ahead of a year-end rip

Investing.com -- In a note to clients Monday, Bank of America analysts highlighted a promising seasonal pattern for the S&P 500 as markets head into the holiday season, emphasizing the tendency for a "post-Thanksgiving dip ahead of a year-end rip," particularly in presidential election years.

The bank said that Thanksgiving week itself tends to bring solid returns, with the SPX rising 60% of the time since 1928 on an average gain of 0.28% (median 0.46%).

This performance is said to be even stronger during presidential election years, with the index climbing 75% of the time and delivering an average return of 0.88% (median 1.08%), according to BofA.

However, they explain that history suggests a slight pullback in the week following Thanksgiving. For all years since 1928, the SPX has risen just 53% of the time during this period, with an average return of -0.01% (median 0.15%).

They add that in presidential election years, this pattern is more pronounced, with the index falling 67% of the time for an average loss of -1.12% (median -0.68%).

Despite this brief setback, the SPX typically delivers strong gains through year-end. From Thanksgiving to New Year's Eve, BofA says the SPX has risen 71% of the time since 1928, averaging a return of 1.46% (median 1.70%). In election years, the numbers remain robust, with the index up 75% of the time for an average gain of 1.38% (median 1.60%).

BofA's analysis underscores the potential for investors to "buy the post-Thanksgiving dip" and ride the traditional year-end rally. The seasonal pattern, coupled with the historical strength during election years, suggests optimism for a bullish close to 2024.

Source: Investing.com