The Santa Claus Rally

We’re right at the historically best time of the year for stocks. Actually, that’s an understatement. Historically, this is the best time of the year by far. Over the last 123 years, one-third of the Dow’s annual gain has come in the next half a month.

Let me be clear: I don’t think there’s any useful trading information in these historical seasonal patterns. I would never make an investment decision based on the calendar. Plus, if you run enough data, some oddball pattern will emerge. That doesn’t mean it’s real.

But I do think these patterns are interesting for their own sake. My guess is that the ending of each year brings forth some optimism for the new year.

Now let’s dig into the numbers. Crunching 123 years’ worth of data we find that from December 21 to January 8, the Dow has gained an average of 2.83%. That’s 18 days and trading is always closed on Christmas and New Year’s Day. That’s 36.5% of the Dow’s total annual price gain (dividends aren’t included) coming in just 4.9% of the year. What’s also interesting is how meager the gains have been for the rest of the time.

Posted by on December 11th, 2019 at 12:19 pm


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