Holiday Period Behavior
Thanksgiving week is more often than not a very good week for stocks. But, this time around, the results were mixed, with the S & P closing up slightly and the DOW falling a little more. The anticipated raising of rates by the Fed, when they meet in mid-December, will likely jar the market, although it has known to expect as much. Any hint of further rate hikes in the new year might send a chill through Wall Street. On the first trading day after the Thanksgiving Day holiday, the S & P fell in early trading. Black Friday sales were said to be off of last year's numbers.
Despite the current problems globally, the Santa Claus rally has been a more likely outcome of the trading days around Christmas and New Years.
There is often a lull or drop in the middle of December that proceeds the turn upwards at the end. Many experts attribute this to the need by fund managers to create some "window dressing" at the end of the year. They unload some poor performers from their portfolios. Tax loss selling by investors may explain the behavior of the market earlier in the month of December as well.
What do you take away from the Santa Claus rally? Since 1896, the Dow, at the end of the year, has risen 76 percent of the time. This statistic means that the rally begins at Christmas though. That, you can hang your Christmas stockings from. Is it a certainty though? Only if you believe that a guy in a red suit flies around the world in a sleigh once a year.