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Santa Claus Rally – Fact or Fiction?

4 December 2019 |Investment strategies
Discover how gearing can be applied to the right client's investment strategy to support their financial goals on a chart background.

Santa Claus Rally – Fact or Fiction?

4 December 2019 |Investment strategies

By Jonathan Agar - Business Assessment & Risk Analyst - Leveraged

The concept of a ‘Santa Claus or Christmas rally’ is not new to financial markets and has been part of both business and financial vernacular since 1968 when Yale Hirsch (editor-in-chief of the Stock Trader’s Almanac) first coined the term. But what exactly is a Santa Claus rally, and how can investors prepare for this phenomenon?

The Santa rally is a seasonal pattern in the share market, whereby the market rallies in the lead up to Christmas and into the New Year. The exact time the rally occurs is open to interpretation, however December and January have traditionally seen average returns across the two-month period in Australia of 2.52% ^.

Causal nexus or Christmas cheer?

The cause of the rally is not definitive but rather accepted as a confluence of factors, notably the ‘feelgood’ lead up to the holiday period, optimism about the new year ahead, absence of data and news out of the northern hemisphere markets which in many ways provides clear air for markets and stocks to shine.

Whatever the cause, with official rates at new lows, a rebounding domestic property market, stabilising commodity prices and the US market at all-time highs, conditions in Australia for a Santa Claus rally are looking promising. However, we mustn’t forget that the looming US-China trade talks and President Trump’s impeachment trial could still swing the market either way.

So how can investors make the most of this phenomenon?

Simply don’t try to time the market to perfection. As one thing is for sure, Santa won't be ringing his bell at the start or the end.

If you have any questions or would like to discuss how Leveraged can assist with achieving the financial goals of your clients, please contact the team on 1300 307 807.

Issued by Leveraged Equities Limited (ABN 26 051 629 282 AFSL 360118) as Lender and as a subsidiary of Bendigo and Adelaide Bank Limited (ABN 11 068 049 178 AFSL 237879). This information is correct as at the time of issue, and is for general information purposes only. It is intended for AFS Licence Holders (or authorised representatives of AFS Licence Holders) only. It is not to be distributed or provided to any other person.


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