Christmas and December have been good to investors
We look at the weekly and monthly returns delivered by the ASX All Ordinaries index since 1992 to examine if there is any truth to the rules that the week between Christmas and New Year is one of the best-performing week of the year and that December is one of the consistently best performing months of the year.
As shown in Table 1, since 1992, the average and median returns of the ASX All Ordinaries index over the Christmas week (24th to 31st December) and December have been above the averages and medians of all the weeks and months during the same time frame. Not surprisingly, the number of negative returns delivered over the same periods is nearly half that of all the weeks and months over the same time frame. Of the 33 years since 1992, there have been eight negative Christmas weeks and Decembers (but not always coinciding).
But is the Christmas story over?
As you’d expect, over the last 33 years, there has been a wide range of returns for each time period (see Table 2), resulting in a significant standard deviation (1.3% for Christmas week, 2.9% for December).
And if there was any validity to the theory, the last seven years suggest that the rule has broken down. Of the last seven Decembers, four have delivered negative returns. Similarly, four of the last six Christmases have seen the index decline.
As shown in Figure 1, since 1992, the Christmas week (between 24th December to 31st December) has delivered above-average returns of +0.7% compared to +0.1% averaged across the 1,718 weeks since May 1992.
The Christmas performance pattern was significantly strong prior to 2019. The 27 Christmas weeks from 1992 – 2018 delivered an average return of +0.9% with only four negative returns. This compares to the four negative periods over the last six years since 2019, which have resulted in an average return of -0.4%.
As shown below in Table 3, of the almost 53 weeks in a year, Christmas week has delivered the best average performance of all the weeks since May 1992. Interestingly, the weeks most regularly occur around Easter (the first week of April and the second last week of March) were the second and third-best performing weeks. This may simply be a coincidence, given the last week of March was only the 14th best-performing week.
The last week of February and the first week in September were the worst and second worst, respectively performing weeks.
As discussed above, eight (24%) of the last 33 years have seen the ASX All Ords decline in value over Christmas compared to declines delivered by 44% (763 of the 1,718) of all the weeks since May 1992.
The histogram in Figure 2 shows the concentration of returns generated by Christmas week compared to all the weeks since May 1992. There is a clear right shift of the average (+0.7%) and median (+0.5%) returns for Christmas compared to all the weeks of the year (average +0.1% and median +0.2%).
Again, we caution that this pattern has inverted over the last six years.
Christmas performance boosts December
Not surprisingly, the strong performance of Christmas has also meant a strong December. Since 1992, the average December return of the All Ords has been +1.8% (median +2.0%), compared to the average monthly return across all 392 months of +0.5%.
Similarly, the decay of the Christmas week effect is mirrored in the decay of the December effect. Despite only nine Decembers delivering negative returns since 1992, December 2024 saw the index decline -3.2%, the second worst December since 1992 (see Figure 3), with the largest December decline of -3.5% occurring in 2022.
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