Are you in a good mood? Are investors all over the
country buying Christmas presents and ignoring their stock portfolios? Do you feel too
good to sell your stocks?
Or, do you have a stock that you want to sell, but you know that you can defer the
capital gains tax for a year if you just hold on for another week?
Or, did you just receive a fat year-end bonus, and you want to throw it into a hot
Internet stock?
Is there truth to the rumor of a "Santa Claus Rally"?
I fired up my trusty MetaStock and Excel to check it out.
What I found was quite interesting, and confirmed my suspicions. During the five days
leading up to Christmas, the stock market has risen, on average, .89%. This may not sound
like much, but imagine if it did this every week! This compares to the average five day
move of .27%. The market has risen on the five days before Christmas during 12 of the last
18 years (For my calculations, I used data for the S&P 500 back to 1980).
The best gain was 4.3% in 1991, and the worst loss was last year, at 3.4% (although the
market bounced back the following week).
The average daily move for the five days before Christmas is shown in the table below,
and charted in the graph below that (note that the average one-day move from 1980 to the
present was +.05%).
| Days Before Christmas |
Average move |
Number of years up |
| 5 |
.50% |
11 of 18 |
| 4 |
.05% |
8 of 18 |
| 3 |
.27% |
10 of 18 |
| 2 |
.04% |
8 of 18 |
| 1 |
.09% |
12 of 18 |
| Totals for week |
.89% |
12 of 18 |
|
Now, this year could always be different, as it was last year. The odds,
however, are on the long side. I think I'll turn off my computer and go buy some
Christmas presents!<JD>
