After such a strong year for the domestic space, November rang in the start of the seasonally strong part of the year with a bit of a hiccup. While the S&P 500 was able to (somewhat surprisingly) squeeze out a 13 basis point gain for the month, the Nasdaq-100 wasn’t quite as lucky. As the intra-month decline was focused on larger tech & growth focused names rather than the “average” stock, the NDX returned to a sell signal on its default chart as it tumbled as far as 8% off its all-time highs. The 1.64% decline for NDX in November was its first negative calendar month since March of this year, marking a break of seven consecutive months of gains. As we all know, markets can’t go up everyday (or every month for that matter) but declines can certainly feel scary… especially as news headlines flash concerns about an AI Bubble around the corner. With that in mind, we can look back in history at other instances of “significant” streaks ending to see what exactly might have in store for NDX going forwards. There are only four other instances since the start of 1993 during which NDX advanced for seven straight months, listed in the table below. Forward returns (median and average) are quite positive, seeing the Nasdaq 100 gain over 25% over the next year. There is something to be said that a handful of these instances came off significant market bottoms which is markedly different than today’s environment just around all-time highs. Regardless, the point revealed by this data set is that markets haven’t been scared off by streaks ending, often they have been healthy opportunities to buy in.

This idea grows further when observing the expansion of breadth markets saw at the end of month. The “average” S&P 500 stock had a much more productive November, seeing SPXEWI gain nearly 1.75% throughout November compared to the previously mentioned .13% gain for the cap weighted SPX. Small caps also stormed back to positive, fueled by a 3.57% rally for the RUT during the final week of the month. All this to say, breadth improved across the board. NDW uses several different indicators to measure breadth, many of which have been featured in the report over the last week or so. Many of you will be familiar with the Advance/Decline Ratio, which counts the number of stocks in a universe that “gained” (moved higher) over the total number of stocks in the universe (those that both advanced & declined.) In plain English, this ratio attempts to depict whether more stocks are moving higher or lower, with higher numbers suggesting more stocks are contributing to upside action. While this ratio can be applied to any universe, the one we will focus on today will be ^NYSEAD, which uses the stocks listed on the NYSE as a starting universe. For context, we smooth out these daily values over a 10-day period to prevent wild swings in data but zoomed in over the last five days (the end of November) during the big end of month breadth thrust. During that 5-day period, ^NYSEAD averaged just over 72%. The table below highlights a handful of other instances during which that metric was hit. Forward returns and overall positive hit rates are quite good across the board.  

All this to say, while markets seemed to stumble in November, the long-term picture remains largely intact. Breadth was (and still is) the largest concern challenging markets as we wrap up 2025… and while it will undoubtedly be a point to watch in December things look to be improving for now.

As we enter the first full trading week of December, we are now in the final stretch of 2025, with just 21 trading days left in the year after Monday. While markets are largely unpredictable, the market can be subject to seasonal biases, with December being one such period that has historically seen above average returns. 

December is typically a solid month for markets, seeing the S&P 500 (SPX) average a gain of 1.7% since 1950, with November being the only month with higher average return. Additionally, SPX has been positive in 77% of Decembers since 1950, which is the highest positive rate among any calendar month. One way to gauge what to expect in a good or bad scenario is to look at the 75th and 25th percentile returns, respectively.  The S&P 500 sees a return at least of 3.8% in 75% of Decembers, which is the fifth best “good” outcome among calendar months. Even a “bad” 25th percentile outcome for December has seen the market average a return of 0.2%, which is easily the best of any month. That effect is amplified for small cap stocks, with the Russell 2000 Index (RUT) averaging a 2.4% gain since 1979, which is the second highest of any month. Overall, the month of December has seen a high floor for returns even in bad years, with things looking even stronger when isolating the back half of the month.

The Stock Trader’s Almanac highlights the market’s strong end-of-year performance as part of the Santa Claus Rally Study, stating, “Santa Claus tends to come to Wall Street nearly every year, bringing a short, sweet, and respectable rally within the last five days of the year and the first two in January.” We will explore the Santa Claus Rally in more detail later this month, but today, our focus is on the historical performance dispersion between the first and second halves of December.

We have gathered data below for the total return of SPX and RUT over three different periods: the first half of the month, the second half of the month, and the entire month. The performance comparison for each index confirms that almost all the average net gains for large-caps and small-caps occur in the second half of the month. Noteworthy observations from the yearly performance comparison are provided below, along with the average return summary.

Historical December Performance Observations:

• The S&P 500 has shown a positive return in December 77% of the time since 1950. However, the index has been positive in the first half of the month just 60% of the time, compared to 80% in the second half.
• The Russell 2000 has been positive 74% of the time, but the small-cap index has been positive only 46% of the time in the first half of the month, compared to 84% in the latter half.
• The S&P 500 has seen the second half of the month outperform the first in 64% of instances since 1950.
• The Russell 2000 has seen the second half of the month outpace the first in 74% of instances since 1978.

As evident from the data above, the effect of outperformance in the second half of December is more pronounced for small-caps than for large-caps. This was observed in our Modified January Effect study last week, which examined the outperformance of small-caps from mid-December through mid-January each year. One possible explanation for this trend is that small stocks, often sold for tax-loss purposes, begin to rebound toward the end of December and into January as investors become more willing to accept risk in their portfolios. Notably, December has recorded the second highest average excess return between the RUT and SPX of any month since 1979.

Considering these December biases within the current market context, the S&P 500 is entering December with the potential for seasonality to add further improvement onto its consistent strength over the past three years. Small caps have also shown significant improvement over the last six months, with RUT outpacing SPX by over 5% since the end of May. However, consistency has been the issue for the Russell 2000, with sharp improvements swiftly followed by retracements lower over the last several years. Small caps remain acceptable despite look relatively weaker than large caps, but we will continue to monitor markets for significant changes in supply and demand, as December return tendencies could be especially influential for small caps as we approach 2026.

Daily Option Ideas for December 1, 2025