Why You Can’t Rely on the Santa Clause Rally

December is typically a good month for stocks, and many believe it is because of the Santa Clause Rally.

The Santa Clause Rally typically happens between Christmas and New Year’s Day. On average the market sees an uptick of about 1.3%.

However, this year will almost certainly be different because that has been the trend.

I would caution investors who are planning on the trend to continue. With inflation still high and the Fed continuing to increase interest rates I would not expect the normal rally to end the year.

I do however believe that 2023 will be a positive year for the market. As the above factors stabilize, wage growth is spread to workers, and supply chain issues subside we are primed for a healthy rebound.

Now is the perfect time to work with your financial advisor and update your long-term plan.

Look at what you can afford to invest over the course of the next few years, and you should ride your way into a new bull market.

Instead of relying on a Santa Clause Rally this year this looks like an opportunity to buy the dip. Start by taking stock of your situation and capitalize while the stocks are on sale.

With all this said, the next month or so means very little for long term investors. It is as good of a starting point as any for people who have many years to let their money grow.

Just do not rely on a rally at the end of the year. That is a short-term solution and not sustainable. Instead use this time to reflect and rebalance and come up with a strategy for the next 10 years not the next month.

Those are the investors who will win in the long run. And feel like a kid on Christmas morning when they open their statements.

What is your market outlook beyond 2022?