presents ohpo iong Rohhp - Investors.com€¦ · The Santa Claus Rally, as it’s commonly used,...
Transcript of presents ohpo iong Rohhp - Investors.com€¦ · The Santa Claus Rally, as it’s commonly used,...
Leaderboard helps you take advantage of a potential Santa Claus Rally! Join today and you’ll get:
• Lists Full of Winning Stocks
• Complete Trading Plans
• Expert Market Analysis
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Ho-ho-hoping for bigger returns this year??
Wait to buy a stock until it breaks
out of a base pattern on higher than average
volume. Don’t jump in too early on a stock just because the market
is rallying.Create custom watchlists of your
stocks and set mobile alerts with the IBD® and MarketSmith® apps. You
can download and try them for free!
It’s difficult to pinpoint an exact cause, but a few theories include:
There’s cheer in the air around the holidays! This can manifest itself in an optimistic outlook that leads to more buying and higher stock prices.
People believe in the Santa Claus
Rally, so they expect the market to rise. People buy more stocks and, as a result, the market rises.
The market is rational, but you can’t say the same for people. Here are a few
ways that investor sentiment could alter the market in late December.
If you’re traveling for the
holidays, use mobile apps to keep track of
the stocks you’re watching from your
phone or tablet.
Set price alerts for stocks you’re
watching so you can be notified when they’re
in a buy range, even if you’re away from
home.
Build a list of the best stocks to watch
during the holidays or time off from work. Start with a stock list that outperforms
the market (like the Leaders List from Leaderboard®)
to save time.
How can you profit from the Rally?
To take advantage of tax code loopholes, some
investors will sell stocks they’ve taken a loss on
at the end of December and buy them back in
January. This creates an artificial stock price
bump in January, and investors anticipating
this may drive up prices at the end of the year.
Institutional investors (like big banks,
hedge funds, mutual funds and pensions)
often make big stock buys before the end
of the year to “bulk up” their portfolios
with stocks that performed well, which
gives a boost to leading stocks.
Individual investors, who tend to be more bullish as a group than institutional investors, will often have year-end bonuses to spend and some time off to spend it. This often results in more buying, which drives stock prices higher.
How does investor psychology factor into it?
Santa Claus
Yes, there really is a Santa Claus Rally! It’s a phenomenon where the stock market
makes bigger-than-usual gains at the end of December and the beginning of
January. In fact, December has been the second-best month for the Dow Jones
Industrial Average going back over 50 years. If you’re not paying attention to the
market during the holidays, you’re leaving money on the table.
Whether or not the market is up or down in December, remember that the market
trend is always the biggest indicator you should follow when deciding to buy or
sell. Investor’s Business Daily® declares a Confirmed Uptrend when the market is
in the best position for big gains. Learn more about how the market trend works
and how you can find out the current trend.
Average returns by month, historical, Dow Jones Industrial Average. Data: Thomson Reuters
The Santa Claus Rally, as it’s commonly used,
usually refers to the time between Christmas and
New Year’s Day. However, historical research says
that the most profitable range of days is the last
five trading days of December and the first two
trading days of January. Even during December
2018’s overall market slump, the Nasdaq rose 2.1%
and the S&P rose 1.3% in the seven trading days of
the Santa Claus Rally. It’s a Christmas miracle!
December returns by year, S&P 500, 1990-2018, Data: AAII
0.9%
0.1%
1.2%
1.5%
0.2%
0.4%
0.0%
-0.1%
-0.4%
1.0%1.1%
1.3%
2.4
8%
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18
11
.19
%
1.0
1%
0.9
8%
1.2
6%
1.7
4%
-2.1
5%
-6.0
3%
-0.1
0%
-0.7
6%
-0.3
3%
-1.8
7%
1.5
7%
5.6
4%
5.7
8%
0.4
1%
0.7
6%
5.0
8%
3.2
5%
1.2
6%
1.6
5%
1.4
8%
5.9
9%
0.8
6%
0.7
0% 2.3
1%
1.7
6%
1.0
8%
Rally
presents
The
-9.1
8%