In an interview with EFN, a Swedish financial channel, Kevin O'Dowd, a stockbroker with decades of experience on Wall Street, says quote "It's a short period, but history shows a tendency for strong returns" unquote. Since 1950, the US broad stock index has advanced an average of 1.3% during this period, with gains in 77% of cases, according to statistics from Dow Jones Market Data.
Mr. O'Dowd offers several possible explanations for the historical pattern. For example, investors who want to buy shares before the end of the year, with the hope of influencing prices or just to position themselves. Two additional potential factors are Christmas bonuses leading to increased investment appetite, as well as lower activity in a market where many investors are busy with other things.
But if the stock market turbulence continues and the Santa Claus Rally fails again this year, it could be a bad omen. At least according to the Stock Trader's Almanac. A rhyme that has been found repeatedly in the book's annual edition since 1973 says quote "If Santa Claus should fail to call, bears may come to Broad and Wall" unquote.
This time, two historical references provide hope. First, it is unusual for the Santa Claus Rally to be absent 2 years in a row. Furthermore, last Christmas's failed Santa Claus Rally was not followed by a particularly weak stock market year in US.
The only piece of coal in the Christmas stocking is the statement from Federal Reserve Chairman Mr. Jerome Powell last Wednesday, quote "We’re significantly closer to neutral. From this point forward, it's appropriate to move cautiously and look for further progress on inflation. I think from here it’s a new phase and we’re going to be cautious about further cuts." unquote.
The outcome of the Santa Claus Rally remains to be seen, but it started off strong.
AI generated image with Grok
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