New Year’s won’t end stock party

Despite the big party on Wall Street this year, the stock market isn’t likely to suffer a hangover when stock trading resumes Jan. 2.

The week after New Year’s, history shows, has been kind to America’s biggest stocks. The Standard & Poor’s 500 stock index has in the past 50 years posted average gains of 0.61% in the trading week after the start of a new year. That return is better than the 0.14% gain for all weeks, according to data from Cincinnati-based Schaeffer’s Investment Research.

Stocks have gone up 60% of the time in the first trading week of the year vs. 56% for all weeks.

“There seems to be some seasonality tailwinds over the next week,” noted Rocky White, an analyst at Schaeffer’s.

If history is repeated, the S&P 500, which in 2017 posted its best year of returns since 2013 with a 20% gain, will start off next year in the black.

The full-year stock market outlook is also upbeat, based on year-end 2018 predictions of more than a dozen stock strategists at Wall Street’s top banks. The most bullish forecast is for the S&P 500 to end next year at 3,100, or 15.3% higher than Thursday’s close of 2688. The least optimistic forecast is 2,750, which equates to a gain of 2.3%.

LPL Financial, which expects returns of 8% to 10% for U.S. stocks in 2018, is betting on stronger corporate profits driving prices higher.

“The market is well-positioned to generate strong earnings, thanks to better global growth and potentially lower corporate tax rates,” the firm noted in its 2018 outlook.