Bank of America (BofA) Global Research highlights that Thanksgiving week often delivers strong performance for U.S. stocks, with historical data suggesting even more pronounced gains during presidential election years.
“Seasonality suggests that Thanksgiving week can be a strong week,” noted Stephen Suttmeier, a technical research strategist at BofA, in a report. According to Suttmeier, the S&P 500 has typically posted “solid” returns during this period, with historical averages showing the index rising 60% of the time since 1928 for an average gain of 0.28% and a median gain of 0.46%.
In election years, however, the success rate climbs to 75%, with the index averaging a 0.88% return and a median gain of 1.08%.
Although the week following Thanksgiving often sees a pullback, this dip has historically been a precursor to a robust year-end rally, dubbed the “rip,” Suttmeier said. His research indicates that in post-election years, the S&P 500 has declined 67% of the time in the week after Thanksgiving, with an average loss of 1.12% and a median decline of 0.68%.
However, investors who bought the post-Thanksgiving dip have often been rewarded, with the index rising 75% of the time from Thanksgiving through year-end, averaging a 1.38% return and a median gain of 1.60%.
This year, the S&P 500 has already surged 25.5% year-to-date, according to FactSet. Historical patterns suggest that when the index gains more than 20% heading into the last week of November, its returns during that week are more in line with historical averages, as noted in a separate report by Bespoke Investment Group.
Despite a relatively quiet week for economic and earnings reports, key data releases are expected on Wednesday before the Thanksgiving holiday, with trading resuming for a shortened session on Friday. As of Monday, the S&P 500 gained 0.3%, closing at 5,987.37, just below its record high of 6,001.35 set earlier this month. The Dow Jones Industrial Average and Nasdaq Composite also advanced, with the Dow reaching a fresh all-time high.
Investors may want to keep an eye on potential buying opportunities, as the historical trend from Thanksgiving to year-end often favors continued market strength.
