??????????? Believe in the Santa Claus rally
??Market Strategy Flash
Do you believe in the Santa Claus rally? It’s a year-end calendar effect first recorded by Yale Hirsch in the 1972 edition of his book, “Stock Trader's Almanac.” Essentially, Mr. Hirsch observed and described the stock market’s tendency to rise around the Christmas holiday. I was born the year after that iteration was published, so I’ve had plenty of time to wonder if there’s more to this seasonal pattern than just holiday cheer :)
As it turns out, there’s a reasonably robust and consistent relationship between S&P 500 returns and the fundamental driver of not seasonally adjusted retail sales growth over the years (see the charts below). Moreover, unadjusted retail sales have popped every December since 1967 (i.e., a 100% success rate since inception) at an average pace of 17% month over month!
What’s the outlook for consumer spending? According to the National Retail Federation (NRF), holiday shopping is off to a solid start. Thanksgiving through Cyber Monday saw ~197 million shoppers, the second highest in history after last year’s record 200.4 million and better than the 183.4 million expected. 58% of survey respondents said they started shopping in early November, given a late Thanksgiving that left five fewer days before Christmas than last year.
From my lens, we’re tracking a 3%+ economy in 4Q24, nonfarm payroll employment recovered from the hurricanes, consumer sentiment keeps climbing, gasoline prices have been falling, the Federal Reserve continues to ease monetary policy, and mortgage interest rates have softened.
“It’s more than a feeling…” – Boston
Sources: FRED, S&P Global, US Census Bureau, WCG, 12/5/24. Notes: Shaded areas show US recessions. Avg = Averages of monthly % changes.
Definitions
The S&P 500 is a market capitalization-weighted index that tracks the stock price performance of 500 of the largest companies listed on exchanges in the United States. Indices are unmanaged and cannot be purchased directly by investors.
A correlation coefficient indicates the strength and direction of a linear relationship between two variables, expressed as a number between -1 and 1. -1 is a perfect negative correlation, 0 is no correlation, and 1 is a perfect positive correlation. Essentially, it tells you how closely two variables tend to move together.
Disclosures
Important Information
Investment advice offered through WCG Wealth Advisors, LLC, an SEC registered investment advisor. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the companies as well as broad market, economic and political conditions. Stock investing involves risks, including fluctuating prices and loss of principal.
This is for educational / general purposes only, does not constitute investment, tax or legal advice and should not be relied on as such. This is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in making an investment decision for any individual. As with all investments there are associated inherent risks. Please obtain and review all financial material carefully before investing. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The opinions referenced are as of December 6, 2024. These comments should not be construed as recommendations but as an illustration of broader themes.
Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Publication Date: December 6, 2024
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