NEW YORK, N.Y. – As we are toward the end of the year, the Santa Claus rally will be largely optimistic for investors.
The Santa Claus rally will not leave coal in the stockings of investors this year, fortunately, as experts see an optimistic rise in the market for the final days of 2019 until the early days of 2020.
The benchmark S&P 500 index has recorded a 1.3% average gain since 1969 for the Santa Claus rally, a seven-day period including the last five trading days of year plus the first two trading sessions of the coming year.
Although the gains for this period are not massive enough to bag full retirement savings for investors, it is a huge help in terms of anticipating what’s in store for the stock market in the coming months, said most of the portfolio managers.
According to the editor of the Stock Trader’s Almanac, Jeffrey Hirsch, the market seems to be looking towards an end of the year when Santa is coming to town.
Based on the market’s history, December has always been a strong month, and often, the most gains during the month are delivered towards its end, according to market experts. The first half of December usually looks a bit weaker following tax-loss selling where investors are trying to minimize their tax bills by putting underperforming shares in the market.
According to some analysts, the bounce on the market during the latter part of the month is often due to the increasing optimism for the holiday season as investors start going on vacations and adjusting their year-end portfolios.
Also, based on the history of the market, a failure to deliver a positive performance during the Santa Clause rally doesn’t bode well for shares coming into the new year. For example, Santa failed to perform at the end of 1999 and 2007, and it was then followed by bear markets in the following years.
But as 2019 ends, investors are looking towards a significant increase in their stock market portfolios, especially following the easing concerns that the US economy is gunning towards a recession and the decreasing trade tensions between Washington and Beijing as well as the strong consumer spending this season. With the optimistic view for this coming Santa Claus rally, market players are optimistic about the market ahead as 2020 begins.
According to the chief investment officer at the Frost Investment Advisors, Tom Stringfellow, there is a minimized economic anxiety right now compared to the same period last year.
Heading to 2020, stocks are pretty high, with the S&P 500 index already recording a 28.5% rally for the year and the Dow Jones going up by 20%.