I’m not about to tell you there is no Santa Claus. But like the “summer rally”, the “January effect”, the “Fed pivot” and other media mythology, it’s first and foremost a Wall Street marketing pitch to gin up sales of a lucrative product line. Unlike most advertising, though, it’s dressed up as “news” or “analysis”. Only seasoned investors are onto it though, having learned through long experience that there is always some angle, some story, as to why you should buy stocks now. No matter what. Even suggesting that you should have 100% of your investable assets in stocks. A CNBC anchor infamously bragged that she did … just before the corona crash of 2020.

Oops.

Not to keep you in suspense … I have no insight into whether the week before Christmas, or the week after – reporters can’t even agree on when the official Santa Claus rally is supposed to happen – will bring St Nick cheer or be aborted by the Grinch. The disagreement reflects the unreliability of the phenomenon. Whichever week is most positive – with the benefit of 20-20 hindsight – will be the one it happened. Yours truly would just put the two weeks together in one lump and be done with it … if he cared.

It’s not that seasonality doesn’t exist, but that it’s unreliable. One analyst notes that while on the whole a there has been a fairly distinct statistical bias to the upside at year end, it has also been weak if not absent at this point in the four year cycle, ironically when the four year cycle itself has an upside bias. And whatever is there probably has more to do with end-of-quarter window dressing and year end bonuses than with any visitors from the North Pole. 

As was pointed out in Markets Update, there might be some one-off levitation supplied this year courtesy of a new excise tax pushing some stock buybacks from early 2023 into late 2022. But how much effect that might have versus the ongoing bear and all the other market drivers that are also in play at any given moment is unknown. And it would be offset by an equal and opposite depressing force after year end due to the absence of that same marginal quantity of the buybacks borrowed. In any case, it is only of interest to short term traders hoping to profit by getting 51% right at the expense of 49% wrong, and whom usually fail to even attain that.

As a practical matter, a mere holiday from Grinch noises from Fed officials may be enough to keep stocks aloft.

Merry Christmas!