Tahoe-Truckee Market Beat: Will there be a Santa Claus Rally in 2015?
The term “Santa Claus Rally” refers to the stock market’s tendency to rise during the last few trading days of the year.
Stock market nomenclature is full of sayings like the January Effect, Sell in May and go Away, the Super Bowl Indicator and many more. A Santa Claus Rally occurs in the last week of the year between the Christmas and New Year’s holiday and happens more often than not.
When we analyze stock market history for annual trends, we usually look back 100 years or so. One hundred years of data is not statistically significant. But, it’s still interesting to study.
December is typically one of the best months of the year for stock market performance. Going all the way back to 1896 the Dow Jones Industrial Average has had an average return of +1.4% for the month of December. The average return for all months over the same time frame is +0.6%.
Year to date, the market is in negative territory, as I write this; the S&P 500 is currently down -2.26% for the year.
Month to date, the S&P 500 is down -3.27%, so it’s going to take a pretty good rally from here for the market to have a normal return for the month.
This year, the month of October was very good for the market as the S&P 500 logged a much better than average return of +8.6%.
If you study the data going back to 1945, in years when October posts very strong gains, the final two months of the year have not been so good.
Remember these are just averages, so that doesn’t mean the market will always behave as it has in the past. Past performance is no guarantee of future results.
The final Federal Reserve meeting of 2015 will end on December 16. The Fed’s actions or comments could have a strong influence on the direction of the market for the remainder of the year.
Many people are expecting the Fed to announce a much-anticipated increase in the Fed funds rate.
If they do increase interest rates, it will be the first rate increase in about 10 years. Even if they decide not to raise rates, their comments could also affect the market.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.