Investing.com -- Stocks started the Thanksgiving week on the front foot, continuing a decades-long seasonal trend that could see the Santa rally into year-end kick into higher gear as it comes during a presidential year.
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"Thanksgiving week tends to have solid SPX returns and is even stronger in Presidential election years," analysts from Bank of America said. "The SPX has traded higher 75% of the time on an average return of 0.88% during the week of Thanksgiving in Presidential election years going back to 1928."
The S&P 500 has shown a pattern of strong performance during the Thanksgiving week, with historical data indicating that the index is up 60% of the time with an average return of 0.28% for all Thanksgiving weeks since 1928. This compares favorably to the SPX trading up 56% of the time with an average return of 0.14% for all weeks since 1928.
Bank of America highlighted that while there might be a "post-Thanksgiving dip," this typically precedes a strong rally into year-end. "The Thanksgiving into yearend period shows the SPX up 71% of the time on an average return of 1.46%," they added.
In presidential election years, this pattern is even more pronounced, with the SPX up 75% of the time from Thanksgiving into year-end on an average return of 1.38%. Despite potential weakness in the week following Thanksgiving, history suggests buying opportunities ahead of a "yearend rip."
The analysts flagged specific stocks poised to benefit from this seasonal trend, naming Datadog Inc (NASDAQ:DDOG), EQT Corporation (NYSE:EQT), International Business Machines (NYSE:IBM), and Walt Disney Company (NYSE:DIS) as bulls, while Anheuser Busch Inbev (EBR:ABI) NV ADR (NYSE:BUD) and Vertex Pharmaceuticals Inc (NASDAQ:VRTX) were noted as bears.
The potential for a robust finish to the year for equities, particularly in a presidential election year where historical trends point to ongoing bullish bets through December, the analysts said.