You better watch out. You better not cry. Better not pout. I’m telling you why…the Santa Claus rally is coming to town!
Next week marks the beginning of the famed Santa Claus rally for equity markets when stocks have historically surged. No one knows for sure why stocks tend to do well the last week of December, but a number of theories have emerged to try to explain it. Many consider the Santa Claus rally to be a result of investors buying stocks in anticipation of the rise in stock prices during the month of January, otherwise known as the January effect. Others suggest tax considerations, happiness around Wall/Bay Street, people investing their Christmas bonuses and the fact that pessimists are usually on vacation this week!
Dundee Securities has tracked the rally as far back as 1964 and according to them, the last 8 trading days of December and the first three of January have been positive for equity investors – with the S&P 500 returning 2% on average, nearly four times the typical return for the average 15-day trading period.
Hopefully Santa brings some nice gifts for investors and traders alike this year!
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