Hi YXI friends,

Today, we are going to review the seasonality trends of SPY, QQQ, and IWM for December.

Is a Santa Claus rally upon us? Which index ETF is the best performer in December? Let’s dive in!

Table of Contents

• 1. Monthly Seasonality

• 2. Intra-month Seasonality - Daily Performances

• SPY, QQQ, IWM Price Charts

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Monthly Seasonality

This year, so far SPY has not really conformed to historical seasonality patterns. For example, SPY enjoyed 5% surge in February, a traditionally weak month. It fell by 4% in April, historically the second best month of the year. We had a wobble at the beginning of August that was quickly faded. And in October, we printed a red month. Fortunately, SPY did print a very bullish November thanks to the post-Election rally, up nearly 6%.

This leads us to December, where seasonality shows an average return of 1.08% since 1996, with the best month returning 6.7% in 2010 and worst month returning -8.8% in 2028.

SPY’s December win rate is 68%, up in 19 occasions and down in 9.

For QQQ, the picture is more mixed. The December average returns have been just 0.6% since 1999. The best December was, of course, in 1999 with a climb of 23.5%, just before the Dotcom bubble bursting. The worst December was in 2002, down 12% right after the bottom being placed in October that year.

QQQ’s December win rate is only 52%, practically a coin toss, up 13 times and down 12.

Are we back in the small cap season? It sure feels like it. After a long sideways action in August-October, IWM shot up by 11% in November. It’s finally trading just below the all time high and we can easily see it continue the momentum in December.

IWM has a historical average return of 1.9% in Decembers since 2000, with the best year being 2023, up 12%, and the worst year being 2018, down 12%.

IWM’s December win rate is 71%, higher than both SPY and QQQ, with positive returns in 17 years and negative returns in 7.

2. Intra-month Seasonality - Daily Performances

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