Leaderboard helps you take advantage of a potential Santa Claus Rally! Join today and you’ll get:

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Ho-ho-hoping for bigger returns this year??

Wait to buy a stock until it breaks

out of a base pattern on higher than average

volume. Don’t jump in too early on a stock just because the market

is rallying.Create custom watchlists of your

stocks and set mobile alerts with the IBD® and MarketSmith® apps. You

can download and try them for free!

It’s difficult to pinpoint an exact cause, but a few theories include:

There’s cheer in the air around the holidays! This can manifest itself in an optimistic outlook that leads to more buying and higher stock prices.

People believe in the Santa Claus

Rally, so they expect the market to rise. People buy more stocks and, as a result, the market rises.

The market is rational, but you can’t say the same for people. Here are a few

ways that investor sentiment could alter the market in late December.

If you’re traveling for the

holidays, use mobile apps to keep track of

the stocks you’re watching from your

phone or tablet.

Set price alerts for stocks you’re

watching so you can be notified when they’re

in a buy range, even if you’re away from

home.

Build a list of the best stocks to watch

during the holidays or time off from work. Start with a stock list that outperforms

the market (like the Leaders List from Leaderboard®)

to save time.

How can you profit from the Rally?

To take advantage of tax code loopholes, some

investors will sell stocks they’ve taken a loss on

at the end of December and buy them back in

January. This creates an artificial stock price

bump in January, and investors anticipating

this may drive up prices at the end of the year.

Institutional investors (like big banks,

hedge funds, mutual funds and pensions)

often make big stock buys before the end

of the year to “bulk up” their portfolios

with stocks that performed well, which

gives a boost to leading stocks.

Individual investors, who tend to be more bullish as a group than institutional investors, will often have year-end bonuses to spend and some time off to spend it. This often results in more buying, which drives stock prices higher.

How does investor psychology factor into it?

Santa Claus

Yes, there really is a Santa Claus Rally! It’s a phenomenon where the stock market

makes bigger-than-usual gains at the end of December and the beginning of

January. In fact, December has been the second-best month for the Dow Jones

Industrial Average going back over 50 years. If you’re not paying attention to the

market during the holidays, you’re leaving money on the table.

Whether or not the market is up or down in December, remember that the market

trend is always the biggest indicator you should follow when deciding to buy or

sell. Investor’s Business Daily® declares a Confirmed Uptrend when the market is

in the best position for big gains. Learn more about how the market trend works

and how you can find out the current trend.

Average returns by month, historical, Dow Jones Industrial Average. Data: Thomson Reuters

The Santa Claus Rally, as it’s commonly used,

usually refers to the time between Christmas and

New Year’s Day. However, historical research says

that the most profitable range of days is the last

five trading days of December and the first two

trading days of January. Even during December

2018’s overall market slump, the Nasdaq rose 2.1%

and the S&P rose 1.3% in the seven trading days of

the Santa Claus Rally. It’s a Christmas miracle!

December returns by year, S&P 500, 1990-2018, Data: AAII

0.9%

0.1%

1.2%

1.5%

0.2%

0.4%

0.0%

-0.1%

-0.4%

1.0%1.1%

1.3%

2.4

8%

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.

‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18

11

.19

%

1.0

1%

0.9

8%

1.2

6%

1.7

4%

-2.1

5%

-6.0

3%

-0.1

0%

-0.7

6%

-0.3

3%

-1.8

7%

1.5

7%

5.6

4%

5.7

8%

0.4

1%

0.7

6%

5.0

8%

3.2

5%

1.2

6%

1.6

5%

1.4

8%

5.9

9%

0.8

6%

0.7

0% 2.3

1%

1.7

6%

1.0

8%

Rally

presents

The

-9.1

8%