Will Santa Claus be Good to us this Holiday Season?

The tricky part about believing in Santa is that there isn’t enough data to validate his existence.?

This is not true of the Santa Claus Rally. Data from the past shows that investors get an average return of 1% during the last five trading days of the year.?

Coincidence? About as coincidental as the fact that the wrapping paper that Santa used matches the wrapping paper your mom kept in the closet…

Research examining S&P 500, NASDAQ, and Russell 2000 stock trends spanning decade long periods confirms that the chance of an up day is 62% during this period, which is better odds than you’ll get at a four person poker game.?

A few reasons attempt to prove this market quirk:

Reason 1 - Jesus?

Evidence indicates that the Santa Claus Rally is less reliable in non-Christian countries. This leaves room for many interpretations, including the possibility that some investors are more willing to pump cash into the market under the belief that "God will provide" – and the Lord and Savior appears to be keeping his word, or, more likely, an influx of cash creates higher returns for all.?

Reason 2 - Economic Goals?

“New year new me!” is more than just an Instagram caption. The new year is a time for many to outline their goals for the upcoming 12 months and actively make moves to achieve them. This includes: eating better, working out more, and yes - saving money by investing strategically. Once again, we see an opportunity for both new and seasoned investors to fork over some cash to the markets. This isn’t to say the money won’t be pulled out by month’s end… but who knows, maybe the “new me” will prevail this time.?

Reason 3 - Tax-Loss Harvesting?

This is arguably the most persuasive reasoning behind the Santa Claus Rally. Tax-loss harvesting is when investors sell losing investments for tax purposes in order to repurchase them in the following year once the markets have improved. Why pay taxes on gains you never got??

Reason 4 - Curb Appeal

It’s not just people who are looking to impress come the new year… fund managers are also known to finesse their portfolios for reporting periods by putting they all the money to work to show investors how good of a job they’re doing with their money.?

This five day market anomaly is loosely explained, historically accurate, yet still quite unpredictable with a 62% success rate. We have religion, wishful thinking, capitalism, and perception to thank for it in addition to a handful of other factors.?

Following the past few months that have brought with them more than a few disappointments for the global economy, what are your thoughts? Is a Santa Claus Rally in our future??