Strong markets finish strong': Why the stock market is poised to hit records in December, according to Fundstrat

<p><img src="https://static2.businessinsider.com/image/5f36baabe89ebf001f044a3d-2400/gettyimages-1161831191.jpg" border="0" alt="NYSE trader" data-mce-source="Drew Angerer/Getty Images"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><ul><li><strong>With the S&amp;P 500 up 12% year-to-date, history suggests that the stock market is poised to continue its historic rise in December, according to a Monday note from Fundstrat's Tom Lee.</strong></li><li><strong>Since 1945, stocks were up 100% of the time in December when the S&amp;P 500 was up 10% to 15% through the end of November, Lee observed.</strong></li><li><strong>"Strong markets finish strong," Lee explained.</strong></li><li><strong><a href="https://www.businessinsider.com/'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingestutm_source=msn.com&amp;utm_medium=referral&amp;utm_content=msn-slideshow&amp;utm_campaign=bodyurl'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener">Visit the Business Insider homepage for more stories</a>.</strong></li></ul><hr><p>The US stock market is poised to hit new records in the month of December, according to <a href="https://fsinsight.com/">Fundstrat's</a> Tom Lee.</p><p>In a note on Monday, Lee explained that "strong markets finish strong" based on a historical analysis of price action in the stock market.</p><p>Since 1945, the stock market traded higher 100% of the time in the month of December when the S&amp;P 500 was up 10% to 15% year-to-date through November and when no bear market was underway, according to the note.</p><p>The S&amp;P 500 was up 12% year-to-date as of Monday.</p><p>In this scenario, which the market is experiencing right now, the S&amp;P 500 would on average return 3% in the month of December, Lee said. A 3% move higher from current levels would represent record highs for the stock market.</p><p>"Unless a bear market starts next month, December looks like it will be a very strong finish for 2020," Lee said.</p><p><em><strong>Read more:</strong>&nbsp;<a href="https://www.businessinsider.com/stocks-to-buy-31-set-to-become-growth-engines-hsbc-2020-12'utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener">HSBC says buy these 31 global stocks that are exposed to the pandemic's biggest disruptions to tech and set to become growth engines of the future</a></em></p><p><img src="https://static3.businessinsider.com/image/5fc6655e037cbd001861318b-858/fundstrat chart.JPG" border="0" alt="fundstrat chart.JPG" data-mce-source="Fundstrat"></p><p>One more factor pointing to continued upside for stocks is a continued decline in the VIX index, which approached the critical 20 level in Monday trades.</p><p>A VIX under 20 would mark the first return to pre-pandemic levels in the fear-gauge volatility index.</p><p>"The benefit of a lower VIX is many funds VaR models (value at risk) would enable a higher level of leverage," Lee explained.</p><p>A VIX below 20 is a strong risk-on signal that could lead to additional inflows into stocks from institutional investors, Lee said.&nbsp;</p><p>A move below 20 in the VIX in December would further fuel the potential for a December rally, Lee concluded.</p><p><strong><em>Read More:</em></strong>&nbsp;<a href="https://www.businessinsider.com/stock-picks-to-buy-covid-recovery-value-rotation-undervalued-rbc-2020-11'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener"><em>Buy these 10 stocks set to soar and smash Wall Street's expectations in the recovery from COVID-19, RBC says</em></a></p><p><a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-to-hit-records-in-december-fundstrat-says-2020-12-1029854385#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/what-its-like-make-beer-with-picobrew-c-home-brew-2020-3">We tested a machine that brews beer at the push of a button</a></p>
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