Picture of the Day: Will This Be a December to Remember?

And we're off! December 2010 started with a bang yesterday, as the Dow raced ahead 2.3%, erasing three straight days of losses over the course of a few short-but-happy hours. And it's only going to get better from here, right?

I mean, according to USA Today, December has historically been the best-performing month for the stock market. Since 1950, the S&P 500 posts gains in a December month 77% of the time. Seems that a rally that began with a bang on Dec. 1, should continue banging right along over the ensuing 30 days. Except for one thing ...

Before banging the drum for December profits, stock market bulls might want to note that we've already surpassed the month's average market gain.

History predicts itself
Sure, it's possible that we'll go on and gain 2.3 more percentage points each and every trading day of the month, leaving the Dow somewhere in the vicinity of Dow 18,000 by New Year's Eve -- but I wouldn't bet on it. Fact is, we could just as easily tread water from here until the ball drops, or even lose money, and still fit right in with the historical average performance you see painted up above.

So, what's with all the jubilation that infected the market yesterday? Well, let's see here:

  • Ford (NYSE: F  ) and General Motors (NYSE: GM  ) reported some pretty strong November sales. (So OK, I'll give you that.)
  • ADP reported that the U.S. added 93,000 jobs in November. (But we need 125,000 just to hold the unemployment rate steady at 9.6% -- so 93,000 doesn't really cut it.)
  • Europe sent Ireland a big check to help with its debt crisis. (Good news for Bank of Ireland (NYSE: IRE  ) and Allied Irish Banks (NYSE: AIB  ) , I suppose.)
  • And closer to home, the Fed announced it's seeing at least "slight to modest" improvement in 10 of 12 U.S. regions. (And Goldman Sachs concurred.)

Call me a pessimist, a glass-half-empty Fool, if you like, but I honestly don't see what all the cheering was about yesterday. Rather, what I see in the chart up above, is investors latching on to a self-fulfilling prophecy. They've seen the Dow outperform over the past century, half-century, and past couple decades. They assume it will do so this year, and buy in anticipation of the run-up -- thereby causing the run-up.

It was fun while it lasted, but it's probably all downhill from here.

At least, that's my take on today's picture. But what do you think? Take the Foolish Rorschach test, and tell us what you see in the chart up above, down below.

Fool contributor Rich Smith does not own shares of any company named above. Ford Motor is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.


Read/Post Comments (3) | Recommend This Article (6)

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  • Report this Comment On December 02, 2010, at 1:14 PM, Optimyst wrote:

    Yesterday's runup was the market correcting itself after all the unwarranted panic (selling) over the Euro zone. The celebration has nothing to do with December history, it has to do with the prospects for 2011 being too good to ignore anymore. For many months everyone has been pushing off all the good news, and focusing on (and overreacting to) all the bad news (which has been less frequent). The market is still undersold, even now. DOW should be just over 12K right now.

  • Report this Comment On December 02, 2010, at 5:12 PM, pete163 wrote:

    Look at these ads above that say if you have $500,000+ nest egg, buy this book. If I had $500,000 do you think I would be here typing this. WHAT A MORON to say, Don't Run Out of Money In Retirement. They don't know dick.

    Now the chart above only shows that Sirius XM is going up, up and UP, that what I see

  • Report this Comment On December 05, 2010, at 6:18 PM, StockMillionare wrote:

    Bet against the rest of December if you want, but I'm a full bull, only time will see who who's right, and another thing I see 2011 as a much better year than 2010 for the stock market.

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