And those playing the stock market may see a Santa
Claus rally this year for more on the stock market
phenomenon. What it means for the year ahead we're
bringing in cheddar news is Michelle Castillo Michelle first tell
us what is a Santa Claus rally? Hannah,
the Santa Claus rally is when the stock market average
of the big indexes. That's the NASDAQ, the
Dow and the S and P 500 rises over a
period of seven days towards the end of this year
and into the new year. However, most people
pay closest attention to the S and P 500 and
it was first observed by Yale Hirsch in the stock
traders almanac in 1972 he saw that the S and
P 500 rose about 1.5% during that week long period
every year between 1950 1971. And for the most
part, it's still true, more than 75% of
the time the stock market average has risen about 1.3%
. So to see if there's a Santa Claus rally
, it's a simple equation. You take the average
of volume trading volume of the last five trading days
of the year, which is typically the week after
Christmas, then you add in the first two trading
days of the new year, you divide that number
by seven and you get the seven day trading average
and then you compare that number to the previous seven
days average. So in case you're wondering when the
biggest Santa Claus rally was, it was in 2008
through 2009, The S and P 500 rose 7.4%
during that time period. So we go a Santa
Claus rally this year. It's still early to tell
. Remember we still need to factor in today's trading
prices as well as next Tuesday and Wednesday. But
so far it looks like we're heading up. So
last Friday, the S and P marked its eighth
straight week of rises. And yesterday, the S
and P rose again about 0.04% from when the day
began. Sure, that's a really my change,
but it's all very close to the all time high
set in January 2022. Now, there's a couple
of economic factors that could indicate we're going to continue
to have the Santa Claus rally. So the US
retail sales during November 1st through December 24th were up
3.1% according to mastercard and other shopping data indicated that
people were actually increasing their shopping budgets ahead of the
holiday as this holiday season went on which is pretty
different. So people tend to have more money to
spend and that means they probably have more money to
invest. Inflation may also be coming down, which
means the fed will cut interest rates and that's encouraging
people to spend money and put more money into the
economy. So what does this mean for the stock
market going into 2024? Well, if there is
a Santa Claus rally, the S and P 500
delivers an average annual return of an increase of 10.4%
in the New Year according to LP L Financial.
But there is an old Wall Street saying that quote
, if Santa Claus should fail to call bears may
come to broaden wall bears mean it's a down market
and broad and Wall is where Wall Street is located
but not having a Santa Claus rally isn't necessarily a
bad thing for the year ahead. Forbes reported that
in 12 years with the S and P 500 average
was down during the Santa Claus period. Only five
years had a negative following year. So it might
not actually mean anything for the future after all,
but it is a good way to end the year
. Michelle Castillo. Thank you for that report.