Week of December 27, 2021

A holiday-shortened week last week saw some solid gains as the Dow, S&P 500 and NASDAQ all finished to the upside, 1.7%, 2.3% and 3.2%, respectively.  Is this the Santa Claus rally?  According to date from LPL Financial, the Santa Claus rally period encapsulates the seven da most likely to be higher in any given year.  Since 1950, the Santa Claus rally period has produced a positive return for the S&P 500 78.9% of the time, with an average return of 1.33%.

“Why are these seven days so strong?” wrote Ryan Detrick, LPL Financial chief market strategist in a note.  “Whether optimism over a coming new year, holiday spending, traders on vacation, institutes squaring up their books – or holiday spirit – the bottom line is that the bulls tend to believe in Santa.”

Investors are closing out 2021 this week with primarily three major issues on their minds – the effect that the Omicron variant may have on the economy, inflation that proven to be anything but transitory and tighter monetary policy from the Federal Reserve.  Just last week, the Bureau of Economic Analysis reported core personal consumption expenditures (PCE) – the Federal Reserve’s preferred inflation gauge – rose at a 4.7% year-over-year clip, or the fastest pace since 1983.