Week Ahead: Will There Be a Santa Claus Rally?

Week Ahead: Will There Be a Santa Claus Rally?

Written by: Phil Evans

A quiet period for some but the week between Christmas and New Year can often see a rally in equities.

Heading for a Santa Claus Rally?

Stocks usually rise in December, so the data tells us. But most of the gains are reserved for later in the month and the so-called Santa Claus Rally, which strictly speaking is the ramp up in equities in the final week of December and first two trading days of January.

The FTSE 100 has risen in December in 25 of the last 30 years. On average, the blue chip has delivered returns of 2.35% in the final month of the year going back to 1987, according to our analysis of Bloomberg data. Last year, the index climbed 5.29%, snapping a run of two years in which the market had fallen in December.

The four major US indices – the Dow, S&P 500, Nasdaq 100 and Russell 2000 – have on average gained at least 1.8% in December for every year since 1987, according to analysis from CNBC and Kensho.

But with indices already at record highs, is there any juice left in the tank to see the traditional festive boost to stocks? Read on for more about the Santa Claus Rally – click here.

German Inflation

The only real data point of note from Europe is the German CPI inflation data, released state-by-state over the morning of Friday, Dec 29th. As with just about every other central bank, the problem facing the European Central Bank in exiting stimulus remains a fairly lacklustre pickup in price growth. Although not the full Eurozone picture, German inflation figures are often a pretty good indicator as it is by far the largest economy and CPI readings tend to be close to the median for the bloc.

Japanese Inflation

Data from North America, Europe and the UK is very thin on the ground, but there is more than a light dusting of releases from Japan to keep JPY trades interesting. Late on Christmas Day as the global FX markets reopen, we have household spending, national core CPI, Tokyo core CPI, and unemployment figures from the world’s third largest economy. Bank of Japan core CPI follows on Thursday.

All eyes remain on whether Abenomics can get Japanese inflation moving the right direction. Recently exports have been on a tear but inflation is not following the lead and remains lacklustre, which suggests the Bank of Japan will be a lot slower to exit extraordinary monetary stimulus than its global peers.

Source: ETX Capital