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The Santa Clause Rally, Omicron’s Effects on The Holidays & Cryptos’ Pre-Holiday Movements

Although Markets are currently closed or quiet there are still some interesting stories to watch.

Market waits for Santa

The Santa Claus Rally is the tendency for the Stock Market to go up during the 5 trading days after Christmas and the first 2 trading days of the New Year

💡What is the ‘Santa Clause Rally’?
Looking back in time this phenomenon was first identified by Yale Hirsch in the Stock Trader’s Almanac, way back in 1973. 

During the 70 years between 1950 and 2020 there have been 57 Santa Claus Rallies (81.4% of the time).  And it’s been meaningful with the S&P 500 going up an average of 1.3% during these rallies the biggest Santa Rally ever was in 2008 with a S&P 500 gain of over 7%. 

Looking ahead the drop in trading volume and the relatively good news about the severity of the Omicron variant of Covid-19 seem to be setting markets up for the traditional rally.  For 2021, Christmas is being observed in the Stock Markets on December 24th or Christmas Eve.  That means we will have a full week of trading to end the year December 27th to 31st and then January 3rd and 4th to start 2022

Omicron paralyzes London

With a record-breaking wave of infections driven by Omicron on top of the persistent Delta wave of the novel coronavirus London is almost a ghost town.  Some estimates indicate than perhaps 1 in 20 Londoners were infected over the last weekend and Prime Minister Boris Johnson pleaded with U.K. residents to take precautions against the virus.  Indications are now that over 10% of the population of London is currently infected among more than 2 million active cases in England alone.

Johnson has promised there will not be additional restrictions before Christmas, which is now only hours away.  What will happen in the coming days and weeks is being hotly debated as all indications are that cases will continue to surge and the current approach of boosting the already vaccinated may not be enough to prevent rising hospitalizations despite Omicron being consider a “milder” virus.

Crypto mixed in pre-holiday trading

Bitcoin was up a modest 0.72% as of writing while Ethereum was down 0.30%.  Given the tendency for large swings in the price of Crypto assets over regular weekends and periods of low volume some traders are trying to time any price swings that appear over Christmas and Boxing Day.

In general, most will be keeping a watchful eye on BTC and ETH to see how they behave during their first Holiday Season as more mainstream assets.

Chaos hits U.S. air travel due to cancelled flights

In the United States holiday air travel volumes are expected to exceed 2019 as pent up demand to visit family and travel outweighs concerns over Covid-19.  However, the Omicron variant has already thrown a wrench into may people’s travel plans.  As of mid-day, the U.S. airlines had already cancelled over 500 flights as crews are either sick or in isolation due to exposure to the virus.

💡What are the airlines’ response?
Airlines are currently lobbying the CDC to reduce quarantine recommendations for cases among the fully vaccinated to 5 days from the current 10.

The problem with the airlines is grabbing headlines but supply chains across the U.S. are under stress as the Omicron variant is creating a shortage of workers just as holiday demand peaks.  There is very little slack in the system because of previous issues and demand does not appear to be letting up.

While the Biden administration has announced some initiatives to help deal with the dislocations created by the Pandemic there is a clear lag before these will have any effect and many Americans are left feeling they are on their own with little to no help available.

“Christmas gives us an opportunity to pause and reflect on the important things around us”

– David Cameron

Richard Ellison, CFA CAIA

Consultant

 

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