The Truth About The Santa Claus Rally

The Truth About The Santa Claus Rally

| December 20, 2019

"If Santa Claus should fail to call, bears may come to Broad and Wall"

While the media and Wall St analysts love catchy one liners, is there any truth to this one about the Santa Claus rally.  The belief is that if stocks do not rise from Christmas through the first couple days of the New Year, the market will experience a bearish January.

Is there any statistical evidence to support that?  No.  Actually over the prior 30 years, we have failed to have a Santa Claus rally only 10 times.  Of those 10 times, only 3 times did the S&P continue lower.  Of those 10 failed Santa Claus rallies, 7 of them had were up 1.7%-3.6% over the next 22 days.  Those are pretty nice returns during such a short time.

We too easily fall for the catchy one liners and let it influence our investment strategy.  Looking at statistical evidence can provide more insight and keep us from poor information that leads to bad investment decisions.

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