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SANTA CLAUSE IS COMING TO TOWN

Tis the season to be jolly! With the near ‘vertical lift’ we’ve all had the good fortune to witness in the broader markets over the past 5 months – you’ll have to excuse me if I’m caught up in the belief that Santa Clause – may already have been and gone.

For those of you who have ever heard of “a Santa Clause Rally” in the stock market – it’s a phenomena generally associated with “lift” to stock indices between Christmas and New Years. According to Investopedia - a Santa Clause Rally is defined as,

A surge in the price of stocks that often occurs in the week between Christmas and New Year's. There are numerous explanations for this phenomenon, including tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week.

How many of you have ever heard the cliché that Christmas, “is the most wonderful time of the year?” 

Here’s Why:

Normally, as human beings – when we get “way ahead of ourselves” and do things [like drink] to excess, there is a price to pay!

But Ho, Ho, Ho – no such things happen anymore in the stock market! Either everyone’s been exceedingly good or surely the good times have arrived!

After gorging on the excess of “vertically UP markets” for the past 5 months, we will no doubt be treated to a healthy dose of the January Effect – which Investorwords.com describes as the,

“Tendency of the stock market to rise between December 31 and the end of the first week in January. The January Effect occurs because many investors choose to sell some of their stock right before the end of the year in order to claim a capital loss for tax purposes. Once the tax calendar rolls over to a new year on January 1st these same investors quickly reinvest their money in the market, causing stock prices to rise. Although the January Effect has been observed numerous times throughout history, it is difficult for investors to profit from it since the market as a whole expects it to happen and therefore adjusts its prices accordingly.”

Let’s just all hope that Santa [or the stock market] doesn’t have any “mishaps” or bump into something he / it should have seen coming all along, ehhh?

Today’s Market

Overseas equity markets began the week on a positive note with Japan’s Nikkei Index gaining 48 points to 16,962. Meanwhile, North American markets struggled to gain traction with the DOW off 4.25 to 12,441.27, the NASDAQ down 21.60 to 2,435.60 and the S & P giving up 4.65 to close at 1,422.45. NYMEX crude oil futures shed 1.22 to end the day at 62.12 per barrel.

Interest rates were unchanged on the day with the benchmark 2-year bond finishing at 4.73%, the 5-year at 4.57% and the 10-year bond ending the day at 4.59%.

On foreign exchange markets the U.S. Dollar Index gave up .04 to end the day at 83.71.

Precious metals ended the day mixed with COMEX gold futures adding .30 close at 616.30 while COMEX silver futures were hammered for a .41 decline to end the day at 12.47 per ounce. The XAU lost 2.03 to close at 140.06 while the HUI gave up 6.48 to close at 332.87.

On tap for tomorrow, at 8:30 a.m. Nov. Housing Starts data is due – expected 1550K vs. prior 1485K. Nov. Building Permits are expected 1540K vs. 1553K. Also at 8:30 a.m. November PPI [Producer Price Index] is due – expected +1.2% vs. prior -1.6%, Core PPI expected +.2% vs. prior -.9%.

With next week being Christmas Day and the following being New Year's Day – I’d like to wish you all the very best for the holiday season and a most happy and safe New Year's celebration!

Rob Kirby

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