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Here comes the Santa Claus rally — What you need to know in the week ahead


In the week ahead, investors will have just four trading days with markets closed for Christmas, though volume should be light all week.

Notable economic releases next week including the S&P/Case-Shiller home price index on Tuesday, The Conference Board’s December check on consumer confidence on Wednesday, and initial jobless claims on Thursday.

As for markets, tax cuts have been passed, the stock market is at record highs, and Santa Claus is coming to town.

Starting last Friday, the “Santa Claus rally” officially began, covering the final five days of the trading year and the first two of the next. During this seven-day period, the S&P 500 has gained an average of 1.35%, the second-best among all seven-day periods possible during the year, according to LPL Research.

Santa Claus is coming to the stock market… the week after Christmas.
Santa Claus is coming to the stock market… the week after Christmas.

And what’s more, the market is up more three-quarters of the time (77.6%), which is the best among seven-day stretches for the benchmark index.

On the flip side, poor stock market performance during this period can portend a tough January for investors, with the first month of the year closing lower each of the last five times the “Santa Claus rally” has resulted in losses for the S&P 500.

Now, seasonal indicators like the Santa Claus rally and “sell in May and go away” fall somewhere between data mining and data torturing.

But if the success of markets during the lightly-attended trading sessions between Christmas and New Year’s are worth noting if for no other reason than the conditions that define this period — low volume, light newsflow — are likely to be consistent year to year.

And amid a week where not much else is expected to go on, if you’ll be tracking markets keeping an eye on Santa Claus is as good as anything else.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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