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Will there be a Santa Claus Rally?

Almost everybody is asking on the Wall Street in each December if there will be a Santa Claus Rally.

Let's see the chances of having a Santa Claus Rally this year, based on statistics!

A little bit about statistics...

One can prepare statistics for Santa Claus Rally in many ways. As I see, people do not even agree on when it begins or when it ends.

I wanted to know how often prices rise between the beginning and the end of December and how much the average increase is. You can see an example below.

Chances based on statistics

There are 3 major types of stocks regarding their performance during Santa Claus Rally: good performers, bad performers and stocks that peform neutrally.

An example statistics of a good performer can be seen below. (The chart is represents the period between 2002 and 2011.)

 

An example chart of a good performing stock. It has quite good statistics, so it seems likely that there will be a Santa Claus Rally for it again.

As you can see, the average increase was 5.85% and the price was rising in 91% of the cases. This means that the price has risen 10 out of 11 times. Quite impressing, isn't it?

You can find many stocks and mutual funds that often perform very well during the Santa Claus Rally, but the answer to whether there will be a Santa Claus Rally is not so simple.

So will there be a Santa Claus Rally or not?

One can easily think that even if the whole market is bearish or moving sideways, choosing a stock with a good statistics will bring you good profits during the Santa Claus Rally.

The truth is that past behaviour does not guarantee any future performance. An investment with good statistics improves the chances to make money but you can not be sure of it.

We recommend everybody to have a look a the monthly statistics chart (like above) before making a Santa Claus Rally investment. With the software Chartoasis Sesame it only takes 3 simple steps to prepare one.