Do you know the “Santa Claus Rally” in the Financial Markets?

December 5, 2016

Will There Be a Santa Claus Rally in 2016? - With So Many Market Events, It May be Hard to Tell.

Do you know the “Santa Claus Rally” in the Financial Markets?

This article is originally referred from iForex Blog

Jingle bells, jingle bells, jingle all the way… yep – the Holiday Season is here. For stores this means Black Friday, Cyber Monday, the Chinese bachelor’s day and then just plain good old shopping, but for global markets this season often brings what is commonly known as ‘Santa Claus Rally’.

What’s that, you ask? We were just getting to it.

This phenomenon is a surge in the price of many shares which usually takes place between Christmas and New Year’s Day.

It’s sometimes also referred to as the ‘December Affect’. Many people have attempted to explain it, mentioning Christmas bonuses, tax and accounting reasons, general optimism and many other factors.

Some people have also explains the Santa Rally by pointing out that investors might be expecting the so called ‘January Effect’  and buying shares in preparation – or rather in speculation.

This phenomenon was first mentioned by Yale Hirsch in his book ‘Stock Trader’s Almanac’, back in 1972. Is it a fact and always happens?

Of course not.

Can anyone say for sure what causes it? Again, the answer is no. Is it a self-fulfilling prophecy when it does happens? Maybe. In any event, some people believe this theory and are now waiting to see if there is a Santa Claus Rally in 2016.

The real question is if we can even notice it. There’s the impact of the so-called ‘Trump Bump’ caused by the US election, there is the aftermath of Black Friday and Cyber Sunday, there is the various elections in the EU.

Investors certainly have a lot of factors to consider. What will December 2016 look like? All bets are off.

Original Source: iForex Blog

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