Get ready, stock investors, because the Santa Claus rally is real, but it’s not coming early! Yes, you heard it right, and it’s a controversial topic among investors.
Wall Street analysts are eager to convince you that the year-end stock market rally is already underway. But is this jolly season really the best time to invest? Mark Hulbert investigates and uncovers some surprising insights.
The Dow Jones Industrial Average has historically risen 77% of the time from the day after Christmas to the first two trading days of January. But is this just a coincidence or a genuine Santa Claus rally? And why do some analysts rush to declare it prematurely?
Here’s the catch: the concept of a Santa Claus rally has evolved over time. Initially, it referred to the post-Christmas week’s upward market bias. However, some analysts now claim it starts as early as November, citing the market’s strength during the last two months of the year. But is this claim statistically sound?
When scrutinized, the data reveals a different story. While November and December have often been good for stocks, this performance hasn’t always been consistent. In fact, when analyzing the Dow’s history since its creation in 1896, the November-December period’s performance varies significantly. In the more recent half, it shines as the best two-month period, but in the Dow’s early years, it was unremarkable.
And here’s where it gets controversial: the same applies to the claim that the stock market has a stronger rally potential in November and December. When measuring the maximum possible rally during these months, it’s not statistically different from other periods. So, is the Santa Claus rally just a myth?
Not quite. The traditional definition of the Santa Claus rally, starting the day after Christmas and lasting through the first two trading days of January, holds up statistically. Since 1896, the Dow has risen 77% of the time during this period, significantly outperforming other periods of equal length.
So, the moral of the story? Patience is key. The genuine Santa Claus rally, worthy of its name, arrives right after Christmas, not a moment sooner. Don’t let Wall Street’s early claims fool you into premature investment decisions.
Mark Hulbert, a MarketWatch contributor, delves into these insights, offering a unique perspective on market trends. His Hulbert Ratings track investment newsletters, providing valuable insights for investors. But what do you think? Is the Santa Claus rally a reliable phenomenon, or just a clever marketing tactic? Share your thoughts in the comments below!