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Should Investors Consider Buying US Small-Cap Stocks this December?

Dec 03, 2018

 

  • Major US stock market indices are our focus as today marks the beginning of the December trading month which has historically been a strong month for US stocks.  
     
  • The table below compares the average December price return of major US stock market indices with the average monthly price return of major US stock market indices over the last 20 years:
 
Index Name Average December Return Average Monthly Return
S&P 500 Index 1.50% 0.30%
Nasdaq Composite Index 1.94% 0.55%
Russell 2000 Index 3.12% 0.59%

Source: Capital IQ

 

  • On a 20-year historical basis, all three major US stock market indices largely outperform in December compared to other months of the year with the S&P 500 Index outperforming by 1.21% in December, the Nasdaq Composite Index outperforming by 1.39% in December, and the Russell 2000 Index outperforming by a massive 2.52% in December. 
     
  • The month of December is already off to a robust start after the United States and China agreed to the 90-day postponement of a planned US tariff hike on Chinese goods that was initially set to take effect on January 1st, 2019. Additionally, US President Donald Trump announced in a tweet last night that China has agreed to “reduce and remove” a 40% tariff on imported American-made cars, lifting automobile manufacturers across the globe higher in today’s trading. 

     
  • While the Russell 2000 Index lags major US stock market indices in intraday trading, investors may want to consider purchasing shares of IWM to take advantage of US small-cap stocks’ historical outperformance of other major US stock market indices in the month of December -- in 11 of the last 20 December trading months, the Russell 2000 Index outperformed both the S&P 500 Index and the Nasdaq Composite Index.

 

Source: Capital IQ