So what is the “Santa Claus Rally”?
I thought I would consult Wikipedia for an accurate description….
“A Santa Claus rally is a rise in share prices in the month of December, generally seen over the final week of trading prior to the new year. The rally is generally attributed to anticipation of the January Effect, an injection of additional funds into the market, and to additional trades which must, for accounting and tax reasons, be completed by the end of the year. The Santa Claus rally is also known as the December Effect.”
The January Effect relates to the fact that annual bonuses paid in December get invested in January.
So will Father Christmas come through for us this year? Have we been naughty or nice? I would like to stay safe and say probably not, because of the problems that are being encountered across Europe currently. But instead I am going to stick my neck out and say yes; the markets are due a short rally and now is a better time than ever. Studying the market continually shows me that you should always expect the un-expected.
I remember the doomsayers from 1999 and the on-coming millennium meltdown. What happened? The market rallied and has never quite got back to that level across much of the developed markets since. It seems that bad news always dominates the news. There has been some good news recently, particularly from the US, China and Japan, but that doesn’t sell newspapers or advertising.
I would like to take this opportunity to wish you all a Very Merry Christmas.