4 Stocks to Make the Most of the Santa Claus Rally
It’s been hunky-dory for the U.S. stock market so far this year. But just because the stock market has scaled upward, it doesn’t mean this is a Santa Claus rally. In 1972, market analyst Yale Hirsch in the Stock Trader’s Almanac first coined the term Santa Claus rally, indicating an uptick in stock prices beginning after Christmas and lasting through the first two trading sessions of January.
During this bullish period, the 30-stock Dow has moved northward 77% of the time since 1896. The odds of the S&P 500 and the Nasdaq scaling upward this year-end are also significantly higher. In reality, the odds of the stock market going up are far better than any periods of comparable length during the rest of the year.
What’s more, all three major U.S. bourses registered gains on Dec 26, the first trading session of the Santa Claus rally period. The S&P 500, in particular, touched its highest intraday level since the beginning of 2022 and is on track to notch its biggest quarterly gains in almost three years. The Dow rose 0.4% in the last trading session, while the Nasdaq advanced 0.5%.
And why won’t the stock market rise during the rest of this year and beyond? The Federal Reserve’s move to end its interest rate hike cycle will surely help the stock market continue its winning streak. In its latest policy meeting, the Fed has kept its benchmark fed funds rate unchanged, while projecting three interest rate cuts in 2024, with more to follow in 2025.
The CME’s FedWatch Tool shows that market participants are anticipating a 72.7% likelihood of a 25 basis points interest rate cut in the upcoming Federal Open Market Committee meeting to be held in March. Interest rate cuts are expected due to inflation cooling down amid sturdy economic growth.
The Fed’s preferred gauge of inflation, the personal consumption expenditures (PCE) price index, declined 0.1% month over month in November after remaining unchanged in the prior month. The increase in the PCE’s yearly rate also slowed down in November compared to October, a tell-tale sign that the Fed’s tightening of its monetary policy to curb inflationary pressure has been, to some degree, successful.
Thus, banking on promising seasonal trends and the Fed’s rate hike pause, things are looking up for the stock market during the final week of 2023 and beyond, which calls for investing in sound growth stocks like American Public Education APEI, Affirm AFRM, Barrett Business Services BBSI and 8x8 EGHT that can make the most of the broader stock market rally.
These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and have a Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 stocks here.
American Public Education is an online and campus-based postsecondary education provider. American Public Education currently has a Zacks Rank #2 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 3.9% over the past 60 days. APEI’s expected earnings growth rate for next year is 115.7%.
Affirm is an emerging growth company. Affirm currently has a Zacks Rank #2 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up 1,000% over the past 60 days. AFRM’s expected earnings growth rate for next year is 130.3%.
Barrett Business Services provides contract staffing, site management and temporary staffing arrangements. Barrett Business Services currently has a Zacks Rank #1 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up 4.7% over the past 60 days. BBSI’s expected earnings growth rate for next year is 8%.
8x8 is the provider of the world's first Communications Cloud. 8x8 currently has a Zacks Rank #1 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up almost 7% over the past 60 days. EGHT’s expected earnings growth rate for next year is 6.5%.
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American Public Education, Inc. (APEI) : Free Stock Analysis Report
Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report
8x8 Inc (EGHT) : Free Stock Analysis Report
Affirm Holdings, Inc. (AFRM) : Free Stock Analysis Report
