(Photo: Ben Hider, AP)
NEW YORK -- It's part lore, part statistical sensation. We're talking about stocks rising around Christmas, a late-year seasonal surge that Wall Street dubs the "Santa Claus Rally."
The Stock Trader's Almanac claims it discovered the phenomenon more than 40 years ago. The definition of the Santa Claus Rally differs depending on to whom you talk. From the Almanac's perspective, it encompasses the last five trading days of the year and the first two trading days in January.
Since 1969, the Standard & Poor's 500 index has increased 77% of the time during this seven-session trading stretch and posted average gains of 1.6%, theAlmanac says.
Bespoke Investment Group defines the Santa rally as the 10 calendar days from Dec. 21 through Dec. 31.
"After (Dec. 20), the fabled Santa Claus Rally kicks into high gear," notes Bespoke co-founder Paul Hickey. Stocks have averaged gains on nine of the 10 days, with a total average gain of 1.8%, Bespoke data since 1928 show. The S&P has posted gains during this stretch the past five years.
So how should investors play it? A Bespoke analysis of industry groups that have performed better than the market's 1.3% average gain in this 10-day span since 1990 include: materials, diversified financials, food and staples retailers, autos and auto parts, media, transportation, consumer durables, and retailing.
A word of warning: When the Santa Claus Rally doesn't occur, it often means a bear market is coming or a better time to buy will come later in the new year, the Almanacsays.
Source: http://www.usatoday.com/story/money/markets/2012/12/20/will-santa-deliver-gains-to-wall-street/1783079/
