What is the “Santa Claus Rally”?
Santa is readying himself to visit many children and adults alike worldwide. It is an exciting time for all. My youngest child and last to write a letter to Santa eagerly awaits. I am sad to think that this may be our last year for the magic of “Santa Claus” in our household. It has been fun. Our full attention however can rightly be focused on the true joy of Christ’s birth for us all.
Santa Claus is Coming to...Wall Street?!
Wall Street also has a soft spot for Santa Claus. You may have heard of what is called the “Santa Claus Rally”. It refers to a seasonally higher stock market around this time of year, typically the week after Christmas as we head into the New Year. Historically, December is the one of the best months for the S&P 500. Since 1928 the S&P 500 has risen in December about 75% of the time. Why you ask? Good question; no one knows the definitive reason. The most likely reason in my belief is that year-end bonuses for most Wall Street traders and investors are dependent on their performance being positive come December 31st. So as you can imagine, they are incentivized in large dollar ways to encourage $anta to be good to them. This results in more cash being invested in stocks and bonds to increase values. Other potential reasons for the Santa Rally are the upbeat joy of the season, the optimistic outlook that most people hold turning the calendar over into a new year (which is called the “January Effect”) or simply the pessimists (aka “bears”) are on vacation.
“News and Noise” doesn’t Dictate Allocation
The name “Santa Claus Rally” is a great “sound bite” for the media and an amusing discussion topic. So, will Santa visit Wall Street and the stock market? No one knows, it is not a sure-thing. The key is to see it for what it is, as more “noise” that simply distracts from a solid, diversified portfolio with a longer term perspective. Don’t get caught up in the noise and enjoy Christmas and the holidays with your family.
I can guarantee that Santa will be visiting our house this year; my kids take very good care of Santa and his reindeer! Here is a picture from 2014. He loves M&M cookies.
From all of us here at Foley and Foley Wealth Strategies, have a Merry Christmas and a Blessed New Year!
Luke Fields, CFP®
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Any information herein is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Luke Fields and not necessarily those of RJFS or Raymond James. Diversification and asset allocation do not ensure a profit or protect against a loss. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Past performance does not guarantee future results.