Forget a white Christmas—investors prefer green which might be why in the runup to December 25, they call upon the magic of Kris Kringle himself to boost their portfolios.
The Santa Claus Rally is a term that describes a boost in market activity during the week leading up to Christmas.
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People get stoked for the holidays. Those good moods and optimistic attitudes can increase market activity, particularly when it comes to buying stocks.
- When more people buy stocks, it drives the price higher—a flurry of buyers can create a “rally” in the market, a period when stock prices rise.
- It’s an interesting phenomenon to observe—but you shouldn’t rely on Jolly Old Saint Nick to guarantee any gains. Economic conditions, company earnings, and global events contribute more to market conditions than Papa Noël.
Analysts predict that we won’t see a Santa Claus Rally this year. Central banks around the globe have raised interest rates, the markets are volatile, and people think a recession will hit next year.
But you can ho-ho-hold on to hope that things could turn around—just don’t bet on it.