Not A Merry Christmas For Wall Street: Bet On These ETFs

With only five trading days left this year, there are no signs of a Santa Claus rally or an increase in stock prices in December, more specifically during the final week of the calendar year (i.e. between Christmas and New Year’s Day). The rally often extends into the first two days of the New Year. In the past five decades, the final week of the year and the first couple of trading sessions in January have registered more than 1% gain.

Since 1928, the S&P 500 has recorded an average gain of 1.7% and posted positive returns 78% of the times in the rally period, according to data provided by Ari Wald of New York-based investment firm Oppenheimer.

Hopes of a Santa rally faded this year as pessimism spread across Wall Street with the S&P 500 on the brink of a bear market (down 18% from its peak early this year). The Nasdaq Composite Index is also in a bear market (down 22% below its record reached in August) while Dow Jones logged in its worst week since the financial crisis in 2008.

Why Santa is Giving Wall Street a Miss

The broader stock market has been on a tumultuous ride in the recent months due to a combination of factors including lingering U.S.-China trade tensions, slowing economic growth in Europe and Japan, troubles in emerging markets, threats of global slowdown as well as slide in oil price.

In fact, the S&P 500 and Dow Jones are on track for the worst December since the Great Depression in 1931. According to Bespoke Investment Group, more than half of the stocks in the S&P 500 are in bear territory, having lost 20% from their 52-week highs.

The sell-off worsened last week following the latest Fed FOMC meeting, wherein Powell raised rates for the fourth time this year but came with a less dovish view. The central bank hinted two lift-offs in 2019, down from the previous projection of three increases but up from one rate hike anticipated by the market. Additionally, the partial government shutdown added to the woes. The market turbulence pushed the S&P 500 to record its first annual loss in a decade while Dow Jones logged its worst year since 2008.

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