All I Want For Christmas Is A Bull Market

Christmas Bull Market 12-25-20, All I Want For Christmas Is A Bull Market  (Full Version) 12-25-20

In this issue of “All I Want For Christmas Is A Bull Market 2021.”

  • Will Santa Claus Visit Broad & Wall
  • The Grinch That Stole Christmas
  • Portfolio Positioning Update
  • MacroView: Yellen’s Arranged Marriage To The Fed
  • Sector & Market Analysis
  • 401k Plan Manager

Will Santa Claus Visit Broad & Wall

Today’s newsletter will be relatively short, but I want to update our portfolio positioning with you. More importantly, I wanted to take this opportunity to wish you and your families a very Merry Christmas and share my hopes for a prosperous and safe New Year.

Over the last couple of weeks, we have discussed why we were positioning portfolios to participate in the traditional year-end “window dressing” rally. Such is also known as the “Santa Claus” rally.

As we discussed in “Will ‘Santa Claus’ Visit Broad & Wall:”

“Stock Trader’s Almanac explored why end-of-year trading has a directional tendency. The Santa Claus indicator is pretty simple. It looks at market performance over a seven day trading period – the last five trading days of the current trading year and the first two trading days of the New Year. The stats are compelling.

‘The stock market has risen 1.3% on average during the 7 trading days in question since both 1950 and 1969. Over the 7 trading days in question, stock prices have historically risen 76% of the time, which is far more than the average performance over a 7-day period.'”

Christmas Bull Market 12-25-20, All I Want For Christmas Is A Bull Market  (Full Version) 12-25-20

The statistics are very compelling. As Ryan Detrick noted this week:

“Whether optimism over a coming new year, holiday spending, traders on vacation, institutions squaring up their books before the holidays—or the holiday spirit—the bottom line is that bulls tend to believe in Santa Claus.” 

Christmas Bull Market 12-25-20, All I Want For Christmas Is A Bull Market  (Full Version) 12-25-20

However, it is worth noting that on more than a few occasions when “Santa visited Broad & Wall,” the bull market didn’t continue in January.

 

A Review Of Negative Januarys

Let’s review the years in which January failed to carry through from the “Santa Rally.”

The first two examples, 2001 and 2002, were in the midst of the “Dot.Com” crash so that we can write those off to a bear market. The same goes for 2009.

However, 2010 is a bit different as the economy had started a recovery, earnings growth was strong, and the Federal Reserve was amid QE-1. Yet, January had a -3.7% rate of return following the “Santa Rally.”  Other than the “Haiti Tsunami,” there was no other major event causing stocks to decline except “exhaustion” after a 10-month uninterrupted advance.

In 2013, January also posted a negative return. The concern of the “fiscal cliff,” as the comprise to lift the “debt ceiling,” required a bipartisan group of Congressman to find $1 Trillion in budget cuts. Their failure to find cuts triggered an automatic set of cuts across agencies. Fed Chairman Ben Bernanke launched QE3 a month before to offset the impact of the “fiscal cliff.” However, given the cuts never materialized, the Fed’s flood of liquidity caused a surge in stocks over the rest of the year.

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