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Santa Claus rally

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A Santa Claus rally is a rise in stock prices in the month of December, generally seen over the final week of trading prior to the new year.[1][2] It is a type of calendar effect.[citation needed]

There is no generally accepted explanation for the phenomenon.[1] The rally is sometimes attributed to increased investor purchases in anticipation of the January effect,[1] an injection of additional funds into the market, and to additional trades which must, for accounting and tax reasons, be completed by the end of the year.[1][2] Other reasons for the rally may be fund managers "window dressing" their holdings with stocks that have performed well,[citation needed] and the domination of the market by less prudent retail traders as bigger institutional investors leave for December vacations.[1]

The Santa Claus rally is also known as the "December Effect" and was first recorded by Yale Hirsch in his Stock Traders Almanac in 1972.[3] An average rally of 1.3% has been noted during the last five trading days of December for the NYSE since 1950.[1][4] December is typically also characterised by highest average returns, and is higher more often than other months.[1]

The failure of the Santa Claus rally to materialise typically portends a poor economic outlook for the coming year; a lack of the rally has often served as harbinger of flat or bearish market trends in the succeeding year.[2][1]

See also

References

  1. ^ a b c d e f g h "Is A Santa Claus Rally On The Horizon?". finance.yahoo.com. Retrieved 2018-12-17.
  2. ^ a b c Menton, Jessica (Dec. 17, 2018). "U.S. Stocks Need a Santa Claus Rally to Avoid a Losing Year". The Wall Street Journal. {{cite web}}: Check date values in: |date= (help); Cite has empty unknown parameter: |dead-url= (help)
  3. ^ Matt Nesto (December 18, 2012). "The Santa Claus Rally: It's Not Make Believe".
  4. ^ "Global stocks dip as 'Santa Claus rally' elusive, oil rises". Reuters. 2018-12-17. Retrieved 2018-12-17.
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