Ho, Ho, Ho.
The year just isn’t complete without mentioning the Santa Claus rally.
Santa Claus Rally
The Santa Claus rally is a stock market seasonal trend; specifically, stocks tend to rise during the last five trading days of December and the first two days of January.
The Santa Claus rally phenomenon is often attributed to several factors, including:
Increased Optimism: Investors are feeling festive.
Vacations: Many institutional investors are on vacation, (i.e., fewer large trades reduce market volatility).
Less Tax Activity: Tax-loss harvesting typically slows down in late December, compared to early December.
Window Dressing: Financial firms may make strategic buys in December to improve the appearance of their portfolios.
Year-End Bonuses: Many individual investors use their year-end bonuses to buy stocks, which can boost market activity and prices.
Will it be a jolly good December for stocks?
Only time will tell!
While we’re waiting, here’s a quick look at the last 26 years:
Related: For more stock market seasonal trends, check out our blog post, Stock Market Seasonality and the September Effect.
Happy Holidays
As the year winds down, I hope you find time to relax and recharge. Reach out anytime.
With gratitude,
–David Bunker, Financial Advisor & Licensed Fiduciary
Before You Go
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This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.