After the fourth down week in the last five, US equities are looking lower once again this morning and the magnitude of the implied decline is getting worse as the opening bell nears. Even though it’s only Monday, the focus is already on Wednesday’s FOMC meeting, even more so now that Stanley Druckenmiller and former Fed Official Kevin Warsh have urged Powell and Company to pause its tightening ‘blitz’ in a WSJ op-ed.

Today, we’ll get reads on Empire Manufacturing and Homebuilder sentiment for the month of December. Last month’s homebuilder sentiment report showed the largest decline since February 2014, so that will be an important release to watch for signs of a bounceback or further deterioration. 

Plain and simple, the first half of December has been awful. Normally one of the strongest months of the year, the S&P 500 has dropped over 5% so far this month putting it on pace to be one of the worst Decembers in the post WWII period. Looking back over the last 25 years or so, it hasn’t been uncommon to see weakness in the first half of December but not declines of 5%+! Going back to 1945, there have only been two other months where the S&P 500 was down 5% or more through the close on 12/14 – 1980 (-8.03%) and 2002 (-5.00%).

So is it time to cancel Christmas? The chart below shows the performance of the S&P 500 in the period covering the close on 12/14 through the close on Christmas Eve. Since 1945, the S&P 500 has seen an average gain of 0.82% (median: 0.70%) during this period with positive returns 63% of the time. And how about the two prior years highlighted above where the S&P was down over 5%? In 1980, stocks really rallied leading up to Christmas with a gain of 5.15%, while in 2002, the rebound was a more muted 0.34% (at least it stopped going down).