4/12/25
Why December Might Secretly Be the Best Time to Start Investing
Why December Might Secretly Be the Best Time to Start Investing
Every December, something funny happens in the stock market. While most people are thinking about gingerbread and holiday plans, some investors are quietly selling the low performers in their portfolios to lock in tax deductions.
Prices dip. Things go on sale. And if you look closely, December starts to look a bit like a Black Friday for stocks.
Then January arrives, and the mood flips. New money enters the market. Those beaten-down stocks often bounce. Analysts dust off their fresh-start optimism. And so begins what some call the January effect.
Welcome to market seasonality. It’s not magic, and it’s not a cheat code. But it is a pattern that shows up often enough to make investors wonder why the calendar seems to have moods of its own.
If you’re new to investing, here’s the good news: you don’t need to perfectly time any of these seasonal quirks. But understanding them makes you a smarter investor, one who doesn’t panic at every dip or chase every rally. Consider this your seasonal guide to the stock market year, told through the four seasons.
What Seasonality Actually Is
Seasonality is simply the idea that markets sometimes behave differently depending on the time of year. Not always, but often enough that people notice: December dips, January lifts, slow summers, surprisingly strong autumns.
Most of these patterns come from long-term data on US and European markets, so it’s important to know that “winter”, “summer” and holiday effects can look a bit different in places that follow other calendars and celebrations.
But these patterns usually come from real human behaviour: Tax deadlines. Holidays. Fewer traders in the office by the beach. Fresh budgets at the start of the year.
So let’s walk through the year, one season at a time.
WINTER (December to February)
The cosy quarter with a surprisingly active market
December doesn’t just bring fairy lights. It brings tax-loss selling, which is when investors sell losing shares to reduce their taxable gains. By selling those assets, the loss is written down and counted against the profits they made on other investments that year. As a result, they only pay tax on the smaller “net” profit.
This usually shows up most clearly in the worst-performing stocks of the year, which can get hit again in December as investors rush to clean them out of their portfolios. That selling can push prices down temporarily, especially in smaller companies. For long-term investors, those moments can look a lot like seasonal discounts.
On the flip side, fund managers will often buy more of the year’s star performers into year-end, a practice known as “window dressing,” so their portfolios look better on paper. That can make the winners of the year shine even brighter in December.
Put simply: bad stocks often do even worse into December, while good stocks often do even better.
Then there’s the “Santa Claus rally”. It’s the nickname for the small burst of market optimism that often appears in the last week of December and the first trading days of January.
This stretch has delivered average S&P 500 gains of around 1.3%, which is statistically strong for such a brief timeframe. Maybe it’s holiday vibes, maybe it’s fund managers tidying up portfolios. Either way, it happens often enough that people gave it a name.
Next up? The January effect. Historically, many of the stocks that were pushed down in December have rebounded as the new year begins. Think of it like financial spring cleaning: old positions closed, new money entering, everyone feeling a bit “new year, new me.”
At the same time, some of the previous year’s best performers can see a short-term dip in early January, as investors lock in profits on their winners, tidy up last year’s tax bill, and rotate some money into shares that lagged behind, hoping they will catch up.
It’s also a psychological reset for many. People promise themselves they'll finally start investing consistently. Pension contributions kick in. Companies renew budgets. The market feels refreshed.
SPRING (March to May)
A sneaky strong season - and one of the most debated sayings in finance
As winter thaws, markets often pick up. Historically, March and April tend to deliver relatively strong average returns for many indices.
In long-run US data, the S&P 500 has returned about 1.1% on average in March and 1.5% in April since 1950, putting both months among the strongest of the year.
Companies report earnings, economic activity grows, and the sense of possibility that comes with spring seems to spill into portfolios.
Then comes that famous phrase: “Sell in May and go away”. It’s based on the idea that markets have historically done better from November to April than from May to October.
The saying dates back to a time when professional traders dominated markets and would literally disappear for the summer, leaving trading volumes thin and price moves muted. Today, with individual investors, passive funds, and algorithms trading year-round, that effect is less pronounced, even if the old phrase still gets repeated.
Is it true? Sometimes.
Is it a rule? Absolutely not.
It’s more of a historical tendency, not a strategy to blindly follow. There have been years where selling in May would have meant missing huge gains. And long-term investors don’t need to hop in and out of the market based on superstition. Time in the market beats timing the market, even if certain months tend to behave differently on average.
SUMMER (June to August)
The slow, sleepy season that makes long-term investors look clever
Welcome to the summer doldrums. Trading volumes often fall as half of Wall Street disappears to Italy. With fewer people making big moves, markets can drift, stall, or wobble more than usual. Some studies show weaker average returns during these months.
But here’s the empowering part: this is the season that proves long-term investors have the upper hand. If you’re investing monthly into a diversified portfolio, summer quietness doesn’t matter. In fact, lower prices can help you buy more shares without even noticing.
Some investors spend their summers trying to time the dips. Others stay consistent and end the year further ahead. Guess which group research favours?
AUTUMN (September to November)
The season with the worst month and one of the best turnarounds
Ah, September. Statistically the weakest month of the year for stocks. No one knows exactly why, but theories range from fund managers rebalancing portfolios to investors returning from holiday with a slightly less optimistic mood.
Then there’s October, the month with the spookiest reputation thanks to the crashes of 1929 and 1987. In reality, most Octobers are completely normal, but the mythology lingers.
And then November arrives like an unexpected plot twist. Historically, November is one of the strongest months for stocks and marks the start of the “winter half” of the year, which has delivered some of the best long-term returns.
For example, US data shows the S&P 500 has finished November higher 59% of the time since 1927, and November has ranked among the stronger months on average for long-run returns.
The pattern goes: anxiety in September, hesitation in October, relief and momentum in November. But again, these are averages - not prophecies.
So… does this mean you should time the seasons?
No - it means you should understand them.
Seasonality explains tendencies, not truths. Markets don’t check the calendar before moving. And building wealth comes from staying invested through all seasons, not just the pretty ones.
Here’s the real takeaway:
• December dips can be opportunities
• January rebounds can be interesting to watch
• Summers don’t need to be feared
• September slumps don’t require panicking
• And November strength shouldn’t tempt you to guess the perfect entry point
Because the real power move, especially for women building long-term wealth, is consistency.
Month after month. Season after season.
When you keep investing through the natural rhythms of the market year, the patterns stop feeling scary and start feeling familiar. And familiarity builds confidence. Confidence builds action. And action builds wealth.
In other words: let the seasons do what they do. You stay focused on the long game.
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