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A recurring phrase in share investing circles at this time of the year is;
“Are we going to see a Santa Clause Rally this year”
What this really alludes to is the observation of a year end rise in share prices from late November to early January
Here is a seasonal graph of the last 30 years (until Dec 2016) for the US based S&P 500 index (I could not find similar data for the Australian market but as the US market usually has a large impact on our market the effect can well be similar);
S&P 500 Index, seasonal trend over the past 30 years
What this graph appears to show is a definite rise in share prices at the tail end of the calendar year.
Why is this so ?“
It is likely due to fund manger activity trying to “window dress” there holdings to make things look better for the end of quarter / year reports and potentially to secure bonuses etc. Also they may well be adding investment funds before calendar year end as part of their investment mandates
It also could relate to year end consumer activity feeding into large retail stocks which are increasingly a larger part of the share market – think Apple and Amazon etc
And also it could well be a more positive attitude form individual investors at this time of year feeding into trading activity No one really knows for sure
So is this a reason to rush out and buy shares? No not really but it is a potential counter point to a lot of the doom and gloom around of late that has infected a lot of investors
Ho Ho Ho !