Ahh, chestnuts roasting by an open fire, the smell of pine, Michael Bublés Christmas album, and the smell of green money as the market rallies for the end of the year due to something called the “Santa Rally” things that scream the holidays to us Orcas. But what does good ole St Nick have to do with the stock market? Well let us go down the chimney together and break this down.
The “Santa” Rally: Refers to a time period around the holidays usually between Christmas and New Years. This is a time period where the market tends to trend upwards. In fact since 1969, 34 of the last 45-holiday seasons showed a positive return in the market. As we dove deeper we found out, no it is not some reindeer magic, but due to some of the reasons below.
Holiday Mood: People tend to be in a better mood around the holidays and because of this people tend to feel more confident about certain stocks #noscroogehere
Bonuses: Lots of holiday bonuses are handed out towards the end of the year, and with the extra cash flow comes more investments #moneyface
Taxes: Year-end brings for tax planning, and in so many ways this increases investments due to specific charitable vehicles that are invested in the market that give tax breaks like (Charitable Lead Trusts). To investor wanting to capitalize on capital losses by finally cutting away their losing picks for the year and matching winning picks to not incur a taxable event in that year #butbabytherearetaxestopay
Vacation: It is said that the professional “bear traders” ones who are negative about the market are usually on vacation around this time. Not having these short sellers around helps increase positive earnings #cottonheadedninnymuggins
Believe: Investors want to believe in the magic of the holidays and the trends of the Santa rally, so they buy in and get swept away, just like we get swept away with spending during the holidays or believing in Santa Clause when we were little. You want to believe that something is real #christmasmagic
Why do we care?
Orcas, we care because once we understand these trends we know when is a good time to invest as well as understand the effects the year-ends have on our overall market. We do not get swept away in the magic of it all rather we strategize and plan for the New Year.
Regardless, the holidays are a special time where we get to wrap up our crazy year, reflect on life events, get fat off plenty of homemade goods, and prepare for the next year. We here at Orca are busy wrapping up year end planning as well as preparing for what 2017 will bring. If you would like to learn more please contact us here.