As the holiday season approaches its end, the last month and a half has brought joy to everyone, even with news of the Omicron variant striking the night of Thanksgiving. We’ve gone through Thanksgiving, Black Friday, Hanukkah, Christmas, Kwanzaa, and Boxing Day with only New Year’s left to go. Gifts were exchanged left and right, likely through the mail, and families gathered with their booster shots and negative COVID-19 tests. Although the holiday season is ending for most of us, people involved with the stock market still have a surprise and a bizarre one in my opinion.
Every year, investors look for the last 5 trading days of the year and the first 2 trading days of the next year for some nice, sizable gains and all-time highs. At face value, this seems ridiculous and like advice from an astrologist, but this is commonly known as the Santa Claus Rally. Crazy, right? According to the Stock Trader’s Almanac, these days have produced positive returns 34 of out the last 45 years with an average return of 1.4 percent, which is surreal to think about. What’s the reasoning behind it? To be honest, no one knows. One could easily pin it to positive holiday spirit and sentiment riding to New Year’s Day, but that just seems weird. Out of all years, you’d expect this to be one where the Santa Claus Rally doesn’t occur because it’s a weird year with a lot of negative headlines like inflation and Omicron. However, the rally might’ve got its spark on Monday with the indices rising by as much as 1 percent, and we still have 6 more Santa Days left. It looks like I’ll be making a lot of moves in this next week! What do you plan to do with your portfolio during the Santa Claus Rally?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.