Date: December 24, 2018

The REAL Santa Claus Rally

All month I have heard the pundits say that the Santa Claus Rally has failed or that Santa failed to call so bears will come to Broad and Wall, popularized by Yale Hirsch of Stocks Trader’s Almanac fame. What incenses me is that those people just blurted and babbled nonsense. The Santa Claus Rally (SCR) doesn’t begin until the last five days of the year and continues for the first two days of the next year. In other words, it literally just began at the close on the 21st with the Dow Industrials at 22,445 and the S&P 500 at 2417.

As I look at the prospects for a SCR, there are two pieces of information I look at. First, is the stock market up or down for Q4 to date? And second, is the stock market up or down year-to-date? In today’s case, both answers are down which is somewhat rare.

Since 1950, there have only been 7 cases where both periods have been down heading into the SCR period. Not surprising, most were during bear markets. In 6 cases, the SCR was up and 5 of the 6 saw significant gains. Only 1977 saw a very small SCR loss of -0.30%. 1994 saw a minute gain of +0.22%. The average SCR gain was a healthy +3.89% with the median clocking +4.64%.

If the past has any validity here which I believe it does, the SCR should perform in line. That means a fairly significant rally of 2-5%.


Paul Schatz, President, Heritage Capital