InvestmentU.com: Santa’s Bag of Profits for Investors
NEW YORK–(BUSINESS WIRE)–Nov. 30, 2005–If you’re wondering what Santa’s got in store for your portfolio this holiday season, take Investment U heed: His bag of profits for investors is looking full enough to proclaim a full-fledged “Santa Claus Rally.” Plainly said, look for a continued uptick in the stock market for the next four to five weeks, according to Dr. Mark Skousen, Chairman of Investment U (http://www.investmentu.com).
If you’re not familiar with the concept, the Santa Claus Rally was first discovered by Yale Hirsch and published in his classic Stock Trader’s Almanac. What Hirsch found was that stocks tend to advance, sometimes sharply, from the day after Christmas to the first two days after New Year’s Day.
But that was back in 1966. Here’s the kicker: Just as retailers have extended the Christmas shopping season to Halloween, the Santa Claus Rally has been extended by traders to cover the final two to three months of the year.
Going back 100 years, during the original Santa Claus Rally, stocks advanced 65% of the time during the week following Christmas Day - and have done better than December as a whole.
In the past eight years, November and December have been extremely bullish. Even during the bear market from 2000-2003, stocks rallied in the final two months.
The following link of the Dow Jones Industrial Average shows the steep run-ups just before the annual vertical lines: http://www.investmentu.com/press/images/santa.gif
There are several factors that drive the Santa Claus Rally:
– The end of tax-loss selling.
– A tendency for investors to fund IRAs and 401(k)s at the start of a new year.
– Financial institutions and mutual funds seeking to be fully invested for the New Year.
– Upbeat year-end forecasts for a good January (the January Effect).
So, will we see a Santa Claus Rally this year?
Since October 1, the Dow is already up 7%, and the Nasdaq 100 is up 15%.
And, there are five reasons why we’re likely to see a continuation of this rally:
1. The Fed may postpone raising rates. Some board members oppose further hikes in the Fed Funds Target Rate. Pressure is mounting for the Fed to ease off, especially with gas and oil prices down from their highs in September. 2. The Fed is pumping new liquidity into the banking system. M2, the broadest definition of the money supply, is now growing at a 7% rate, the fastest this year.3. Corporate earnings are strong. 4. CPI inflation is likely to ease, following a sharp drop in gasoline prices.5. Long-term interest rates have fallen back under 4.5%. In sum, the outlook for holiday merriment is better than ever.
Click here for the Five Places to Invest Your Money Now: http://www.investmentu.com/IUEL/2005/20051121.html
Dr. Mark Skousen is an economist who has taught finance and economics at Columbia Business School, Barnard College at Columbia University, and Rollins College in Winter Park, FL. He recently was nominated as the Chairman of Investment U, a free educational financial e-letter with more than 275,000 subscribers. For more information about our editors, or to set up an interview, please contact Juan Munoz at 410.223.2693 or jmunoz@oxfordclub.com, or visit http://www.investmentu.com.
|
