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You may have heard of a long documented market phenomenon, aptly called the Santa Claus Rally, referring to the markets history of outsized returns during the last five days of the year and the first two days of the New Year. During this time frame, the market rises 77% of the time with an average return of 1.7%.
No one really knows why this pattern exists; though some attribute it to year-end portfolio tax related adjustments, vacations and plain old holiday optimism. The amazing thing is, despite being known for decades, the rally continues to persist.
It seems in good and bad years alike, the year ends with a bang.
Unfortunately, the rally is much more muted in years with lower returns. Using the nearly flat 2015, the regression equation (removing years in which the market sold off by 10% or more) predicts no rally in 2015/2016.
While this may not be the year to take advantage of the Santa Claus Rally, there will be opportunity in the future. Something to keep in mind in 2016.
The Burney Company is an SEC-registered investment adviser. Burney Wealth Management is a division of the Burney Company. Registration with the SEC or any state securities authority does not imply that Burney Company or any of its principals or employees possesses a particular level of skill or training in the investment advisory business or any other business. Burney Company does not provide legal, tax, or accounting advice, but offers it through third parties. Before making any financial decisions, clients should consult their legal and/or tax advisors.
