Investors eye ‘Santa Claus rally’

NEW YORK — Is Santa Claus coming to town? Wall Street thinks so, even though stocks already have 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.

Stocks have climbed as the U.S. economy continued to grow and countries in other regions gained strength, all of which sent corporate profits higher.

Meanwhile, central banks are still steadying the markets with bond purchases and low interest rates. The end of those stimulus programs is in sight, but by historic standards bond yields are low, which makes stocks more appealing as investments and makes borrowing money easier for people and companies.

In the U.S., investors are pleased with President Donald Trump’s cuts in regulations and the prospect of lower corporate taxes. It’s also been a historically calm year for the market, with stock indexes hitting records at a steady pace without a lot of big moves up or down. Given all that, conditions seem right for further gains in in December.

“Chances are good that we end up with a positive final month of the year,” says Sam Stovall, chief investment strategist at CFRA Equity Research. The wild card is the tax cut plan.

“If the Trump tax cut fails, I think the market goes into a 10 to 15 percent decline,” Stovall said.

RICHARD DREW / AP 2015 Santa Claus visits the trading floor of the New York Stock Exchange, perhaps to set off a rally in his name.