Noam Galai is the photographer
The strongest month of the year has been December.
The Santa Claus rally could be in trouble this year because of the Omicron virus.
Bank of America said on Thursday that they remain cautious on the S&P 500.
According to data from Bank of America, December is the strongest month of the year and investors are conditioned to expect positive stock market returns.
Since 1936, stocks have returned an average of 2.3% in December and generated a positive return of 79%, which is known as the Santa Claus rally.
In December of last year, the S&P 500 plunged 7.6% due to concerns about the Fed and growth.
Bank of America's Savita Subramanian said in a note on Thursday that the same concerns could derail any year-end rally in stocks.
"Any resurgence in COVID could make it harder to get supplies," said Subramanian, before acknowledging that more information is needed to assess how deadly and transmissible the Omicron variant is.
An inflation-led consumption hit is one of the risks that could slow growth.
On November 30th, Fed Chairman Powell told Congress that speeding up the monthly bond purchases could be justified even in the face of a new coronaviruses strain. The comments show that Powell is more focused on containing inflation than decreasing unemployment.
The stock market's high valuations and the Fed's shift in stance could cause trouble for investors. "We are cautious on the S&P 500 because of the Fed tightening into an overvalued market."
If the stock market goes through a rough patch, investors shouldn't lose faith in the Santa Claus rally, according to Ryan Detrick.
"December might be strong for stocks, but remember it is the second half of the month when Santa tends to show up," Detrick said on Wednesday.
The research is done by LPL Research.
Business Insider has an original article.
