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The Real Reason Behind The Santa Rally

Tyler Durden's picture




 

Everyobody knows that the Santa Claus rally which traditionally caps every calendar year, has a twofold role: one is to window dress the portfolios of underperforming (which these days means almost all) asset managers who get a 4-5% pick up in "value" not due to their asset selection skills, but because everyone rushes in at the end of the year in a mass buying orgy, thereby making returns seems higher than they normally would be; the second - and more important - is to boost consumer confidence and to encourage that all important American instinct - spending money one does not have to purchase things one does not need, an instinct that kicks in far more easily when one sees the Dow Jones rising every single day heading into the holiday weekend.

But while this is intuitive for most, there actually is a scientific explanation why it has to happen ever year.

According to Evercore ISI "over the past 20 years, there's been an 87% correlation between S&P performance in 4Q and Holiday Sales." As of right now, the S&P in Dec is now on track to be up - a few days ago it wasn't. Furthermore, the S&P is now up +5.5% above its Sep average. If it holds there, the 20-year regression line below suggests that Holiday Sales will be up +5.4%...

Chart: Evercore ISI

... which is clearly better than just a 2.5% increase, one which would lead to even further reductions in Q4 GDP and concerns the Fed will have to end its rate hikes and go back to ZIRP.

It also means that the rally of the last three days which pushed the S&P higher by 3%, and back to green for the year, was the cheapest and most efficient way to boost retail sales, which feed directly into GDP, by virtually the same amount, and which in turn will be spun by the CNBC's of the world as bullish for stocks, thus closing the feedback loop.

Reflexivity: because it 100% of the time it works every time.

 

 

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Thu, 12/24/2015 - 13:04 | 6960496 KnuckleDragger-X
KnuckleDragger-X's picture

I can see it, but understanding it...well........

Thu, 12/24/2015 - 13:35 | 6960605 Never One Roach
Never One Roach's picture

Investors pull most money from US mutual funds in 2 years

 

 

http://www.msn.com/en-us/money/savingandinvesting/investors-pull-most-money-from-us-mutual-funds-in-2-years/ar-BBnRri2?li=BBnb7Kv

 

 

 

Thu, 12/24/2015 - 14:56 | 6960864 sun tzu
sun tzu's picture

That must explain why the market keeps levitating

Thu, 12/24/2015 - 13:44 | 6960629 Perimetr
Perimetr's picture

Wrong.

The reason for the Christmas rally and all those that have preceded it since 2008?

The Plunge Protection Team, the lawless Tresaury Department, the banksters and the deep state.

Soon this will end.

Thu, 12/24/2015 - 13:06 | 6960502 PAWNMAN
PAWNMAN's picture

Have a hard time understanding how a stock market rally, when I don't have a dime invested in it, would make me want to run out to the mall and blow some cash.

Thu, 12/24/2015 - 13:06 | 6960505 BlackSea
BlackSea's picture

Correlation should not be confused with causation.

Thu, 12/24/2015 - 13:34 | 6960600 TuPhat
TuPhat's picture

The correlation of confusion is the causation.

Thu, 12/24/2015 - 13:12 | 6960520 cossack55
cossack55's picture

Lack of coal for stockings since all of the mine shut-downs.

Thu, 12/24/2015 - 13:12 | 6960521 Sudden Debt
Sudden Debt's picture

Retail is bleeding right now here in Europe.

Just alone fashion is down over 20% due to the way above normal hot weather and entire wintercollections are still on the shelf.

Electronics is also bleeding because of cheap chinese ecom sites that are booming right now.

 

Thu, 12/24/2015 - 13:14 | 6960525 nakki
nakki's picture

Reflexivity: because it 100% of the time it works every time.

 ???

Thu, 12/24/2015 - 13:27 | 6960561 wcvarones
wcvarones's picture

Nice chart but they should show the regression line if you exclude 2008.

Thu, 12/24/2015 - 13:44 | 6960630 Montani Semper ...
Montani Semper Liberi's picture

 And the Santa rally algo has been unleased for the last hour of trading today. Damn near straight up to unchanged for the day.

 Merry effing Christmas, Wall Street.

 

Thu, 12/24/2015 - 14:14 | 6960747 Montani Semper ...
Montani Semper Liberi's picture

 Good lord! I called the top on that rally. Some serious profit taking in the last 15 minutes.

 Lesson learned. I vow to never again comment on stock prices while the market is open.

 Now as for gold, any body else hear the waterfall that is coming next week? You could throw a ten dollar bill over the trading range for the last 4 days. Always a bad sign. 

Thu, 12/24/2015 - 16:33 | 6961127 BingoBoggins
BingoBoggins's picture

One can only hope. I've been short miner's for longer than can make one merry.

Thu, 12/24/2015 - 13:55 | 6960671 Consuelo
Consuelo's picture

 "...and more important - is to boost consumer confidence and to encourage that all important American instinct - spending money one does not have to purchase things one does not need, an instinct that kicks in far more easily when one sees the Dow Jones rising every single day heading into the holiday weekend."

 

The author makes a good observation here, as 'consumer spending' and the 'confidence' that underpins said consumerism is in fact, directly correlated with the positive 'sentiment' that a rising market gives, and the all-around feeling of economic 'security' - that everything is 'Ok', hence they not be as worried about eating pork & beans under a bridge in 6 months, so $blow it out the cannon today - because, 'every little thing, is gonna be alright'...

Thu, 12/24/2015 - 13:55 | 6960675 buzzsaw99
buzzsaw99's picture

It also means that the rally of the last three days which pushed the S&P higher by 3%, and back to green for the year, was the cheapest and most efficient way to boost retail sales...

sarcasm?

Thu, 12/24/2015 - 14:32 | 6960805 Yen Cross
Yen Cross's picture

  Retail sales are in the shitter...

 The only assclowns buying stocks are the few dipshit macros playing algo PONG with each other. Look at volume.[barf barf]

Thu, 12/24/2015 - 15:01 | 6960876 Laddie
Laddie's picture

Happy Holidays, as is said in post Christian USSA.

Yes, Virginia, the Jews Stole Christmas Kevin MacDonald PhD
Originally posted in 2012, this article gets at the Jewish ethnic angle behind the “War on Christmas.”

There seem to be two messages here. One is the message of subversion utilizing ridicule among other methods. The other is that Jews are seen as high-mindedly making Christmas “into a holiday season belonging to all Americans.” The end result is that Christmas is not “taken too seriously” and the Christian religious aspect central to the traditional holiday is de-emphasized.

People who take their religion seriously do not allow their religion to be ridiculed. One need only think of the Muslim reactions to cartoons ridiculing Mohammed. The fact that Jews have been able to ridicule Christianity without any serious negative consequences is an important marker of Jewish power and an equally strong indication of the decline of Christian religious belief. I suspect that the organized Jewish community would react in outrage if non-Jews ridiculed religious Judaism. Indeed, any criticism of Jews as Jews is off limits in the mainstream media. (A topical short list of verboten topics: the loyalties of neocon Jews and their role in promoting the war in Iraq, the Jewish aspect of the Ivy League admissions scandal, how Jewish control of Hollywood influences media content.)

It bears repeating once again that Jews react with hostility to the idea that Israel should not have a Jewish ethnocultural core while they have led the campaign against the idea that America and the West have any ethnocultural core. As with their promoting non-White, non-Christian immigration, their advocacy has nothing to do with ideals of moral universalism but everything to do with pursuing what’s good for the Jews, motivated by Jewish hatreds toward the traditional people and cultures of the West. The war on Christmas is thus a central example of the theme of Jews as a hostile elite.

"Bad Santa" and Eli Plaut's "A Kosher Christmas" by Kevin MacDonald
[This article was originally posted on Dec. 24, 2013; it is a comment on an article that appeared inTableton Dec. 17, 2013.Tablethas seen fit to repost it in 2014, on Christmas eve, so I thought I would repost my comment.]

Merry Christmas . . . NOT! Part 1 by Edmund Connelly

Merry Christmas Movies . . . NOT! Part 2 — Anti-Christmas Movies

Why does it matter that Jews control Hollywood? In essence, it matters because it represents the loss of power of one group—majority white Christians—to a group with a long history of hostility toward the people and culture of the West. Jewish control of Hollywood has been a crucial means for dispossessing majority whites from their place in the country they built. As some have argued, the twentieth century was “a Jewish century,” and much of this was because Jews controlled the image factory known as Hollywood.

Thu, 12/24/2015 - 19:12 | 6961561 nopat
nopat's picture

Goddamn dude, your working knowledge of correlation and causation (and statistical inference) is pathetic.  You've officially jumped the shark.

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