Investors eye ‘Santa Claus rally’

Is Santa Claus coming to town? Wall Street thinks so, even though stocks have already exceeded most expectations this year.

December on average is the best month for stocks. Investors call the gains a Santa Claus rally: a late-year boost that helps the markets end on a high note. Although there are some warning signs and reasons for concern, analysts have good cause to think December 2017 will bring more cheer.

From 1950 to 2016, the Standard & Poor’s 500 index rose an average of 1.6 percent in December. November was second, with an average gain of 1.5 percent. Jack Ablin, chief investment officer for BMO Capital Markets, said investors made a habit of buying at the end of the year to position themselves for January, when stocks typically did well. That set off a cycle.

“When I started in the business, I remember reading studies about the January Effect,” says Ablin, who’s worked in finance for three decades. “Once that became common knowledge, the January Effect turned into the December Effect, and now appears to be creeping into November, too.” Stocks have climbed as the US economy continued to grow and countries in other regions gained strength, all of which sent corporate profits higher. After a gain of 2.8 percent in November the S&P 500 has gained 18 percent so far this year, thanks in large part to big gains for technology companies such as Apple, Google’s parent company Alphabet and Facebook. /