Much has been written and said about something that many refer to as “The Santa Claus Rally”. Also a lot of pundits use a lot of different definitions as to what time period is supposed to constitute the SCR. For me, I like to think in terms of “the Holiday Season” so I cast a pretty wide net.
The SCR Time Period (by my standards)
In my book the SCR time period includes the last 6 trading days of November and extends through the last trading day of December. OK, I realize that to hope for a bullish stock market throughout this entire period is a lot to ask of “The Big Guy”. But if history is a reasonable guide, he may be up to the task.
The Test
For this test I simply looked at price data (not total return data, which presumably would generate higher numbers since it would include any dividends) for the Dow Jones Industrials Average starting in 1942.
Figure 1 displays the growth of $1,000 invested in the Dow ONLY during the last six trading days of November and the entire month of December each year starting in 1942.
Figure 1 -Growth of $1,000 invested in the Dow ONLY during the last six trading days of November and the entire month of December.
The Good News is that we can characterize the results displayed in Figure 1 as a “bullish long-term seasonal trend.”
The Bad News is that we can in no way refer to it as “a Sure Thing”.
Still, the overall results are worthy of note.
Things to note:
* # Years UP = 62 (83.8%)
*#Years Down = 12 (16.2%)
*Average UP Year = +3.45%
*Average DOWN Year = (-1.80%)
*Largest Gain = +11.0% (1970)
*Largest Loss = (-4.7%) (1969)
Summary
So can we count on Santa Claus to deliver higher stock prices between the close on November 21, 2016 and December 31st, 2016?
As always, time will tell.
(prior yearly results appear below)
Jay Kaeppel
Why did you decide to begin the data in 1942?
Why did you decide to begin the data in 1942?