Santa Claus Is Coming To Town But Will A Market Rally Follow?

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.The article below is a guest contribution by Guy Lerner, writer of the Technical Take blog.

By Prieur du Plessis: If Santa has not yet made his way to your investment portfolio, don’t despair.

SummaryIn previous articles I've been laying out the case that long term valuations for the stock market are historically high, which generally means a leveraged financial system. A leverage financial system generally means an economy that is fragile, susceptible to shocks, and prone to recessions. As equity markets closed lower in August and have entered September, historically the worst month for the stock market, the question being pondered by investors: is this the normal summer doldrums or are we headed towards another recession?

If Santa has not yet made his way to your investment portfolio, don’t despair. According to Jeffrey Hirsch (Stock Trader’s Almanac), the “Santa Claus Rally” normally occurs during the last five trading days of a year and the ensuing first two trading sessions of the new year. During this seven-day period stocks historically tend to advance (by 1.5% on average since 1950), but when recording a loss, they frequently trade much lower in the new year.

Pacific Financial Planners submits:There is no doubt that Santa Claus arrived on Wall Street this year! With the S&P 500 and the NASDAQ Composite up 14 of the last 17 trading days, the Santa Claus rally posted a return of over 6% on both indices. Not a bad return from the bearded one. But who really is Santa Claus? Is he the historical figure that we all heard about? Or is the bearded one a new Santa, one bringing billions of dollars of cash to Wall Street firms daily, from the Federal Reserve Bank?

Pacific Financial Planners submits:There is no doubt that Santa Claus arrived on Wall Street this year. With the S&P 500 and the NASDAQ Composite up 14 of the last 17 trading days, the Santa Claus rally posted a return of over 6% on both indices. Not a bad return from the bearded one. But who really is Santa Claus? Is he the historical figure that we all heard about? Or is the bearded one a new Santa, one bringing billions of dollars of cash to Wall Street firms daily, from the Federal Reserve Bank?

If Santa has not yet made his way to your investment portfolio, don’t despair. According to Jeffrey Hirsch (Stock Trader’s Almanac), the “Santa Claus Rally” normally occurs during the last five trading days of a year and the ensuing first two trading sessions of the new year. During this seven-day period stocks historically tend to advance (by 1.5% on average since 1950), but when recording a loss, they frequently trade much lower in the new year.