The Santa Claus Rally: Market Myth or Holiday Miracle?
The holidays are a special time when we gather with loved ones, exchange gifts, and indulge in our favorite seasonal treats. Did you know that in the financial world, holiday party conversation often revolves around the Santa Claus Rally? While opinions differ on its cause, there's no denying that this festive phenomenon is a fun story to explore.
What is the “Santa Claus Rally?”
The phrase ‘Santa Claus Rally’ sure invokes images of jolly old Saint Nick and his sleigh full of presents. Yale Hirsch coined the term in 1972 after noticing that the stock market often shows a noticeable uptick in the final five days of December and the first two days of January. According to the Stock Traders Almanac, the average increase in return has been 1.3% since 1950.
Possible Explanations
There are many guesses as to why this happens. Some investors suppose it might be due to year-end bonuses and increased spending. Others point to factors like tax-loss selling and Required Minimum Distributions season being over. Another popular explanation is that institutional investors tend to be less active during the holiday season, giving the market more room to move due to the lack of short-selling. I suspect the optimism of a new year ahead might have something to do with it.
It's impossible to say whether these theories hold water or the whole thing is a humbug! What is important to remember is that investing during the holiday season, or any time for that matter, requires careful planning and strategy. The key is sticking to your investment plan while avoiding impulsive decisions.
So - is the Santa Claus Rally going to make an appearance in 2023? Investors will just have to wait and see!
Happy Holidays
As we take a break to spend time with our loved ones and reflect on the past year's events, let us not forget to take a moment to appreciate the season's magic. Remember to set aside some time to reflect on your accomplishments from the past year and set some goals for 2024!
Best wishes for a happy holiday season!
Opinions expressed in the attached article are those of the author/speaker and are not necessarily those of Raymond James. All opinions are of this date and are subject to change without notice. Past performance may not be indicative of future results. The forgoing is not a recommendation to buy or sell any individual security or any combination of securities.
