Posted on: Sunday, December 8, 2002

Wall Street hoping Santa will be kind to stocks

By Adam Shell
USA Today

NEW YORK — Investors looking for a potentially powerful market-moving force to keep the rally going on Wall Street need look no further than the bearded, big-bellied gift-giver himself: Santa Claus.

History suggests there's a credible reason for investors to remain optimistic about stocks' ability to move higher: It's the season to buy gifts — and stocks. Consider:

• InvesTech Research says the traditional rally covers a two-month period beginning in December. Since 1970, the Dow has gained an average 4.2 percent in the December-January period.

• The Stock Trader's Almanac says the St. Nick-inspired surge occurs in the last five trading days of the year and the first two in January. The seven-day span has resulted in average gains of 1.6 percent for the Standard & Poor's 500 since 1970.

A combination of holiday cheer, upbeat year-end forecasts from market gurus, the end of the tax-loss selling season and a propensity of investors to finance IRAs and 401(k)s at the start of a new year are key factors that contribute to the market's seasonal strength.

Many market watchers say Santa will again give the market a boost, assuming investors' biggest worries — war, terrorism and economic relapse — don't deliver an unexpected knockout blow.

But even if Saddam or Osama bin Laden don't spoil the holidays, some experts say it's unlikely the market will post eye-popping gains, given the Standard & Poor's 500's robust 18.1 percent gain since its Oct. 9 low. "I'm not saying you'll get that big diamond ring, but you might net a nice sweater or a necklace," Hirsch says.