Will There Be a Santa Claus Rally This Year?
The holiday season is in full swing, and it could bring good tidings to you and your kin...
Within the past several weeks, you guys have sent me a ton of emails asking about the prospects of a Santa Claus rally this year.
Generally speaking, a Santa Claus rally (aka Christmas rally) is a phenomenon that causes stocks to rise sharply in price during the last five trading days in December and the first two trading days in the following January. This type of rally oftentimes sets the tone for a strong stock market performance in the first quarter of the new year.
While the specific catalysts for this rally are unknown, there is overwhelming speculation that it’s caused by strong consumer confidence and robust retail sales.
That’s a very big deal because retail sales make up over 70% of the GDP (gross domestic product), or the total market value of all the finished goods and services produced during a specific time period.
So will there be a Santa Claus rally this year, and how could it impact your trading account? Keeping reading this article to find out.
Will We See a Santa Claus Rally This Year?
The simple answer is no.
I don’t believe a Santa Claus rally is in our cards, and I wouldn’t hold your breath for one for several reasons.
The market already outperformed the overall statistical performance of the average annual return by a factor of two. In fact, the S&P 500 is up over 12% — double the average annual return of the index over the past 20 years.
Momentum levels are also grossly overbought, which tells us the market is stretched out and could consolidate or correct within the coming weeks.
Unemployment levels are sharply rising, and more importantly, staying near COVID-19 levels for the past several months.
And retail sales? Well, they missed expectations in the month of October — which isn’t a good sign for November and December.
But before you think about running for the hills, there are two stocks that could potentially see higher prices and rally into the new year. Here’s a hint: The first one has something to do with everyone’s favorite mouse.
Check out my short video to hear all the reasons why I’m not expecting a Santa Claus rally and the short list of stocks that could still rally regardless.
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