Do we believe in a Santa Claus rally?

Market Ethos.
November 28, 2022

The term ‘Santa Claus rally’ is a term coined over the years for a good reason. Data back over a century reveals that December has the highest probability of any month to be in the green for the TSX and S&P 500 – 77% and 76%, respectively. The average gain for the TSX at 1.9% is the highest among all months, while the S&P 500’s average of 1.4% is a close second place after July. This time of year is usually kind to equity portfolios.

With the TSX and S&P 500 charging ahead by 6% and 8% respectively in October, and up 5% and 4% so far in November, Santa certainly came early this year. This does raise the question though: will this Santa Claus rally make it all the way to Christmas? The holiday is a mere four weeks away, which does sound like it is quickly approaching (must start shopping soon). However, four weeks in this ‘bear’ market is a long time, and the market is already rather extended. The S&P 500 is once again bumping up against its 200-day moving average. The bear market rally of the summer months reached this measure as well before making an about-turn

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