Santa Claus rally will create investor cheer

Christmas seasonal patterns in the stock market suggest that the markets are likely to be stronger into the end of the year.

Historically it is normal for the stock market to rally in December and this is known as the Santa Claus rally – a bit of Christmas investor cheer, especially after this tough year.

The Australian market was historically strong through March and April then weaker throughout June, before rallying again in July.

The July rally failed to eventuate, but the June weakness was certainly visible, so much so this year it carried on throughout July.

October has a deservedly bad reputation with the market falling throughout the month and has become famous for the 1987 crash, the 1997 collapse of the Asian economies and the sharp falls during the credit crunch in 2008.

A bottom is often formed in November and early December before a strong rally is seen in the final two weeks before the New Year.

While seasonal patterns are not guaranteed to deliver strong profits to investors or traders the patterns do have a high probablility of playing out in the future.

Not all the reasons for these seasonal tendencies are clear, but it can be very profitable to follow them through all the same.

I wish you all a merry Christmas and I trust Santa Claus delivers you exactly what you want for Christmas.

I will certainly be positioned to take advantage of his generosity.

- Sean Rothsey is executive chairman of the ASX listed diversified financial services company MDS Financial Group Ltd. (MSW:ASX). He lives at Sunshine Beach and works from Cooroy. MDS Financial maintains offices in Sydney, Melbourns and the Gold Coast. NISER can assist local business or individuals. Please email me at sean@niser.org.au or 5442 5050 or visit www.mdsfinancial.com.au

This is collated for your information from The Cube Financial Group PTY Ltd AFSL 232455 (“Cube Financial”) a subsidiary of MDS Financial Group Limited. Any individual reading this should discuss, with their financial planner or advisor, the merits of any recommendation or offer presented in this material for their own specific circumstances and realise that not all investments are appropriate for every individual.

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