Santa Claus Rally 2022
~ Saturday, December 17, 2022 Blog Post ~
Stocks plummeted yesterday, Friday, December 16, 2022, per business and markets news outlet CNBC. This latest development in the US stock market happened as investors carried on selling into year-end on fears a recession is coming this 2023 due to the Federal Reserve System’s unrelenting interest rate increases.
The Dow Jones Industrial Average or DJIA shed 0.85 percent. Moreover, the S&P 500 dropped 1.12 percent. The Nasdaq lost grip of 0.97 percent. Nevertheless, I do believe there is a chance a Santa Claus rally will take place.
If you are not familiar with this stock market terminology, let me tell you what it means. Based on a definition published on Investopedia, a Santa Claus rally pertains to the tendency for the stock market, particularly the S&P 500, to recover over the week that leads up to Christmas.
As you know, the S&P 500 — or Standard and Poor’s 500 — is the indicator of 500 large-capitalization firms. This US stock market index is more frequently quoted by financial experts as it covers approximately 70 percent of the whole US equity value.
Additionally, these companies represent all of the US economy’s major sectors, including manufacturing, financials, healthcare, technology, energy, retail, and pharmaceuticals. Thus, the S&P 500 better reflects the US market than the DJIA.
Speculations for the Santa Claus rally’s existence consist of institutional investors settling their books prior to going on Christmas vacation, seasonal spirit fueling optimism, and boosted holiday shopping.
Historical stock market performance over the past twenty years from 2002 to 2021 demonstrates merely a tiny positive average return of +0.385 percent for the week leading up to Christmas.
I gathered from the Investopedia article that the Santa Claus rally may just be random, as with plenty of stock market anomalies. There is no assurance that this tendency will materialize in the future. Therefore, there may or may not be a Santa Claus rally as this year draws to a close. Let’s just wait and see.
References:
https://www.cnbc.com/2022/12/15/stock-futures-are-down-slightly-as-investors-continue-sell-off.html
https://www.investopedia.com/terms/s/santaclauseffect.asp
https://www.newyorkertips.com/christmas-trees/christmas-tree-in-wall-street-fidi/
