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Santa (Rally) Came This Year, Air Travelers and Omicron Chaos & GoDaddy Shares Up 10%

Santa arrives on Wall St.

Equity markets started the week after Christmas on the front foot as the traditional Santa Claus Rally appears to be playing out.  Despite concerns over Covid-19 and other potential headwinds stocks I the United States and Europe were up.  In late afternoon trading the Dow was up 0.89%, the NASDAQ was up by 1.27% and the S&P 500 increased by 1.20% to a new record high.

💡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%.

In Europe the DAX ended the day up 0.50% while the CAC 40 was up 0.76%.  The mood was somewhat more muted in London where the FTSE 100 was down a tiny 0.02%, despite the U.K. Government announcing that there would not be any additional Covid-19 restrictions prior to the New Year.

Looking ahead JPMorgan released a note on Monday saying that they did “not expect Omicron to impact the growth outlook in any significant way, but rather it is likely to accelerate the end of the pandemic,”.  Investors appear to be banking on the common end of year rally to finish a positive year for stocks where the S&P 500 has already risen by 27%.

Chaos continues for air travelers

It is the worst of times to be travelling by air as bad weather and a shortage of flight crews has resulted in thousands of flight cancellations.  By mid-day on Monday over 1,000 flights had been cancelled in the United States due to Omicron and weather with around 2,500 cancelled globally.  A further 9,000 flights have been delayed with the potential to still be cancelled. 

This follows the cancellation of more than 6,000 flights on Christmas Eve, Christmas Day, and Boxing Day.  On Sunday there were more than 5,000 delayed flights as airlines around the world fought to maintain some semblance of a normal schedule. 

💡 More on this
One of the key factors to this was the fact that job vacancies also rose, hitting a new high of 1.3 million in the quarter.

Given the flight disruptions and cost to the airlines involved it was not surprising to see that these shares were left out of the Santa Claus Rally with most carriers trading down on Monday.

Southwest Airlines (LUV) was done 0.41%, American Airlines (AAL) was off by 0.71%, while United Airlines (UAL) was down 0.96% and Delta (DAL) fell by 0.84%.

Whoa Daddy, GoDaddy spikes on Starboard Value stake

Shares of online services and web hosting company GoDaddy (GDDY) jumped by almost 10% at one point and were still up 8.2% in late afternoon trading after activist investor Starboard Value announced it had taken a 6.5% stake in the Company.  Regulatory filings revealed that Starboard had amassed a close to $800 million stake in GoDaddy, which caused the favorable market reaction.

GoDaddy’s share price has remained relatively flat during the pandemic even with a surge in online traffic and web activity being driven by Covid-19.  Market commentators are expecting Starboard to push management at GoDaddy for changes to unlock value in the Company.

“Invest for the long haul. Don’t get too greedy and don’t get too scared.” 

Shelby M.C. Davis

Richard Ellison, CFA CAIA

Consultant