The Santa Claus rally is one of the most widely anticipated events for investors this time of year. Some believe that it is an indication of what will take place in the stock market in the following year. And with the current state of the global economy, this year’s Santa Claus rally could be more important than ever.
The Santa Claus rally marks the end of the holiday season and the beginning of the New Year. Traditionally, it’s seen as a period of time where stocks attempt to rise and buyers begin to enter the market more cautiously. This year, however, the situation could be somewhat different.
While the stock market’s overall trajectory has been positive throughout 2020, it has been subject to big drops and major volatility at times. As such, investors will want to keep a close eye on the ‘Santa Rally’ to help gauge the overall sentiment in the market and whether or not the stock market will continue to trend higher in 2021.
Additionally, investors should watch out for signs of a potential “Santa bottoming”. This is when stock prices drop sharply and abruptly at the end of the year, before quickly rebounding to create a Santa Claus ‘rally’. These events often happen in bear markets and could be a sign of a potential bottom for the stock market.
Investors should also pay attention to the activities of the Federal Reserve and the bond market. Both of these institutions can have a huge influence on the stock market, and their movements can give clues about what is happening in the economy and where the stock market may go next.
The Santa Claus rally can be seen as a indicator of what is to come in the stock market in the coming year. With the current state of the global economy, investors should pay close attention to this market event and the movements of the Federal Reserve and the bond market to get an idea of what is likely to happen in 2021. Taking all of these indicators into account can help investors make the best decisions for their portfolios in the New Year.