Every year, as the holiday season approaches, investors and traders alike keep a close eye on the stock market’s performance. One of the most intriguing phenomena observed during this time is what is known as the “Santa Rally.” This term refers to the tendency for stock prices to rise during the last few weeks of December, typically continuing into January. In this blog post, we will explore the relationship between Black Friday and the Santa Rally in the stock market from 1990 to 2022.
Black Friday, which falls on the day after Thanksgiving, traditionally marks the start of the holiday shopping season. It is also considered one of the biggest shopping days of the year, with retailers offering significant discounts and promotions. In recent years, Black Friday has expanded beyond just a single day, with many retailers starting their sales early and extending them throughout the weekend.
The Santa Rally, on the other hand, is not associated with any specific event or holiday. Instead, it is believed to be driven by investor sentiment and optimism about the upcoming new year. Many investors use this time to rebalance their portfolios and take advantage of tax-loss harvesting opportunities before the end of the year.
So, what is the correlation between Black Friday and the Santa Rally? To answer this question, we analyzed stock market data from 1990 to 2022. Our findings showed that there is a positive correlation between these two events. Specifically, when Black Friday sales are strong, it tends to lead to a higher likelihood of a Santa Rally occurring later in December.
This relationship can be attributed to several factors. Firstly, strong holiday shopping sales indicate healthy consumer spending, which is often seen as an indicator of a strong economy. When consumers are spending more money, businesses tend to perform better, leading to higher stock prices. Additionally, the Santa Rally may be driven in part by investors looking to take advantage of any post-holiday shopping season momentum.
In conclusion, our analysis suggests that there is a positive correlation between Black Friday sales and the Santa Rally in the stock market from 1990 to 2022. Strong holiday shopping sales seem to be an indicator of a healthy economy, which can lead to higher stock prices during the Santa Rally period. As we head into the holiday season, investors may want to keep a close eye on Black Friday sales and other economic indicators to gain insight into how the stock market may perform in the coming weeks.
(Photo by Max Fischer: https://www.pexels.com/photo/man-in-yellow-shirt-and-brown-pants-5869616/ )