Some Joy of the Season and Is Santa Claus and His Rally Going to Be Naughty or Nice? By, D. R. Barton, Jr.

Barton TT1“Joy is the serious business of Heaven”. —C.S. Lewis, British Author

I love the Christmas season for a variety of reasons. Of course, it’s a time to enthusiastically celebrate spiritual traditions: The birth of a baby in a manger and the miraculous burning of the last available sacred oil for eight days instead of one. Regardless of your spiritual tradition, it’s also a time of year when folks, in general, slow down and really endeavor to remember friends and family, and spread a little cheer along the way.

Later in this article, I want to share some current data and thoughts about that most commercial and psychological of seasonal tendencies—the Santa Claus Rally. But first, let’s touch on some new, long-term research data about happiness/joy that’s come out within the last year. I’ve written about the joy of the season before, how that joy plays a big role in my family’s celebrations and how that same practice of joy has a proven scientific track record of improving brain function. Since I last checked the literature, a more recent article in the Journal of Aging and Health has added to this proof of the beautiful, positive relationship between psychological well-being – the social science term for joy – and improved cognitive function.

Long-Term Benefits of Joy

In a joint study conducted by Fudan University in Shanghai, China and the University of Michigan (published in September 2021), almost 9,500 people over the age of 60, who showed no cognitive impairment, were tracked for 12 years. Cognitive function was tested five times in that period. Those with higher levels of joy showed overall slower rates of cognitive impairment over time and a lower probability of developing any impairment.

What’s the bottom line? Spread some joy. It helps the people you reach out to and helps your big ol’ melon as well!

Will the Santa Claus Rally Show Up This Year?

My wife and I have been empty-nesters for six years now and the family and friends we see during the Christmas season varies greatly year-to-year. Toss in a pandemic (two of our closest friends in two different U.S. states have covid as I write) and the variability is even greater.

What has shown very little variability over the past five+ decades is the post-Christmas, or Santa Claus, Rally. Let’s take a look…

“If Santa Claus should fail to call,

Bears may come to Broad and Wall”

—Old Wall Street Saying, unattributed

Santa Claus Rally Statistics

In their well-known Stock Trader’s Almanac, Yale Hirsch and now Jeffery Hirsch have tracked the year-end directional tendency of the markets and proposed the Santa Claus indicator. (They also provided the quote above.)

The Santa Claus indicator is pretty simple. It looks at market performance over a seven-day trading period—the last five trading days of the current trading year and the first two trading days of the New Year. What we find are some compelling stats.

Since 1969, this seven-day period has returned positive results in the S&P 500 in 41 out of 53 years for an impressive 77.4% win rate and an average return of +1.3% for all years. Looking back another 20 years shows that the seasonal move holds up with a similar percentage of wins and gains. More impressively, there weren’t any really strong or weak decades. Instead, just consistently seven or eight winning years out of every 10:

2012-2021: 8 of 10 positive years
2002-2011: 8 of 10 positive years
1992-2001: 7 of 10 positive years
1982-1991: 8 of 10 positive years
1972-1981: 7 of 10 positive years
1969-1971: 3 of 3 positive years

There are no sure things in the trading and investing world. But the Santa Claus Rally, with its consistent win rate over the past five decades thanks to some pretty helpful fundamentals (like fund managers adding winners to their portfolios late in the quarter and new money being put to work in the first couple of days in the new year), add fuel and logic to the consistency of this seasonal winner.

Whatever your spiritual tradition, I hope that all the love and joy of this season is with you and your families! And, may you have a happy and prosperous New Year!

Next week, look for more on the first five days of the new year indicator.

I’d love to hear your thoughts and feedback or what brings you joy. Send me an email at drbarton “at” Until next time…

Great trading and God bless you,

D. R.

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