(Bloomberg) – Wall Street expects the stock market to deliver a belated gift to investors amid a volatile December.
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Monday kicks off an annual event known as the “Santa Claus rally” when the stock market tends to climb until the end of the year. Since 1969, the S&P 500 Index has averaged a 1.3% gain over the rally’s seven-day period, which includes the last five trading sessions of the year and the first two trading days of the new year, according to The Stock Trader’s. Almanac.
“Whether it’s optimism about the new year ahead, holiday spending, holiday traders, institutions balancing their books, or the holiday spirit, the bottom line is that bulls tend to believe in Santa,” wrote Ryan Detrick. , chief market strategist at LPL Financial, in a note.
The major US indices post double-digit gains in 2021, driven by a strengthening economy, supportive monetary policy and public spending. However, investors are now grappling with a host of concerns including stubbornly high inflation, tighter policy from central banks, increased travel restrictions around the world brought on by the omicron variant, and mounting concerns about an economic slowdown.
This has been one of the most volatile Decembers on the S&P 500 since 1987, according to data compiled by Bloomberg. The benchmark’s average daily movement has been 1.1% this month through Thursday, the fourth-highest for any December in more than three decades behind 2018, 2008 and 2000.
The first half of December is typically weaker, and in the second half of the month, institutional investors buy bargains when retail investors go on vacation. When they’re not buying stocks, that indicates something might be wrong with the stock market, experts say.
Traders Look to Add to 2021’s Big Gains With ‘Santa Claus Rally’
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