What to watch

Will Santa deliver year-end rally to Wall Street?

It’s December, and that means talk of a “Santa Rally,” talk of coming gains for small-company stocks (better-known as the “January Effect”) and talk of what’s next for the stock market in 2017 will dominate the airwaves. (And don’t forget the “Trump Rally,” which will be a hot topic, too.)

After a strong November, when the Dow Jones industrials gained nearly 1,000 points (it has only rallied 1,000-plus points in a single month four times in its history, according to The Stock Trader’s Almanac), December comes with high expectations.

December ranks No. 1 in monthly performance since 1950 for the Standard & Poor’s 500 stock index, which puts seasonal- ity on the market’s side, according to Almanac editor Jeffrey Hirsch. Also working in the market’s favor is the psychological boost of “holiday cheer” and signs of “better, (but) still not great,” economic times witnessed by the government bumping up thirdquarter U.S. growth to 3.2%.

Since 1969, the Santa Rally (it runs Dec. 23 thru the second trading day of the new year) has produced average gains of 1.5%, Hirsch says. The January Effect, a phenomenon in which small-cap stocks rally early in the new year — but which now starts in midDecember — also provides hope.

But Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, warns the Dow’s surge and small-cap Russell 2000 stock index’s 11% gain in November may signal Santa “is early this year” and the gift-giving to investors is over.