Putting Stock in a December Surprise

Small-cap investors are used to getting a holiday bonus

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Small-cap investors are used to getting a holiday bonus, especially when November is a rough month for markets. A yuletide rally in the small-cap Russell 2000 index often follows Thanksgiving doldrums. Since 1979, the index posted a November drop eight times. A December bounce followed each one. The last time the index fell in the fourth quarter was during the 2000 tech bust.

But this year, things might be different. Citigroup equity strategist Lori Calvasina says despite that track record and a recent survey showing lingering hope among investors for a year-end pop, recession fears could spell more winter woes for small-cap stocks. The Russell 2000 is down year to date as worried investors head to safe havens like large caps or bonds. Calvasina says the index is at "a crucial juncture. Some good pieces of news could set us up for a nice December. Unfortunately, I haven't seen that catalyst yet."