Santa sends a late gift to investors

Late gifts from Santa often are the most cherished. Just ask Wall Street.

Santa left investors a present early in 2018. The so- called “Santa Claus rally” — a period that spans the final five days of a year and the first two days of the new year — came to Wall Street this year. And that bodes well for stocks the rest of the month and the full year.

The Standard & Poor’s 500 stock index posted a 1.1% gain in the seven- session span that ended on Jan. 3. That’s good because a market that declines in that period often means a bear market is coming or stocks will suffer a sizable fall, according to The

Stock Trader’s Almanac. The best examples of that downward price momentum continuing were 1999 and 2007, when the Santa rally didn’t materialize and brutal bear markets followed.

“In the rare instance that the market gets a lump of coal instead of a Santa Claus rally, that usually means there could be weakness in January,” says Ryan Detrick, senior market strategist for LPL Financial. “You can call it a potential indicator that something could be wrong. In fact, over the past 20 years, five have seen coal and sure enough, January was lower every single time.”

The fact Santa left a gift that wasn’t coal this year, therefore, is a positive indicator.

The last five times the Santa Claus rally occurred, LPL Financial data show, stocks rallied sharply four times in January. The biggest gain in January was 5% in 2013, following a 2% Santa rally return. The Almanac summed up: “Santa finally delivers!”