COTW: Santa Claus Rally

COTW: Santa Claus Rally

SUMMARY
  • The Santa Claus Rally refers to a phenomenon in the U.S. stock markets where there is often an uptick in stock prices in the last five trading days of December and the first two trading days in January. On average, the Santa Claus rally has historically produced an excess return of +1.5%. Returns during the Santa Claus Rally period have been positive 79% of the time.
  • This trend, observed over several decades, is attributed to a variety of factors. These include increased holiday shopping, optimism for the New Year, tax considerations, and lower trading volumes due to many traders taking holidays.
  • The rally isn’t guaranteed every year, but it’s a notable pattern that traders and investors watch for as a potential opportunity for gains in a typically joyous season. The term ‘Santa Claus Rally’ adds a festive touch to this market trend, linking it metaphorically to the cheerful and generous spirit of the holiday season.

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