Written by Hudson Adviser Phillip McGann
A recurring phrase in share investing circles at this time of the year is;
“Are we going to see a Santa Clause Rally this year”?
What this really alludes to is the observation of a year end rise in share prices from late November to early January.
Here is a seasonal graph of the last 30 years (until Dec 2016) for the US based S&P 500 index (I could not find similar data for the Australian market but as the US market usually has a large impact on our market the effect can well be similar);
What this graph appears to show is a definite rise in share prices at the tail end of the calendar year.
Why is this so ?
It is likely due to fund manager activity trying to “window dress” their holdings to make things look better for the end of quarter / year reports and potentially to secure bonuses etc. Also they may well be adding investment funds before calendar year-end as part of their investment mandates.
It also could relate to year-end consumer activity feeding into large retail stocks which are increasingly a larger part of the share market – think Apple and Amazon etc.
And also it could well be a more positive attitude from individual investors at this time of year feeding into trading activity. No one really knows for sure.
So is this a reason to rush out and buy shares? No not really, but it is a potential counter point to a lot of the doom and gloom around of late that has infected a lot of investors.
Ho Ho Ho !