5 Must-Own Stocks for the Santa Rally
These need to be in your portfolio ASAP...
My job is to tell you what's coming next for markets.
And history has shown that my calls are often on target.
Whether it was calling the crypto bear market bottom in April 2023, predicting Nvidia (NVDA) would be a top performing stock again in 2024, or urging you to buy the dip during the Yen Carry Trade panic in August, these forecasts are the reason the TikStocks Portfolio is up +44% in 2024, crushing the S&P 500’s +27% return over the same period.
Now, with December upon us, it’s time to focus on one of the most reliable market phenomena: the Santa Rally.
Here Comes Santa Claus...
The "Santa Rally" refers to the historical tendency for stock markets to rise during the last five trading days of December and the first two trading days of January.
It's one of the most reliable patterns I've seen in my 15-year career, and there's plenty of data to back it up.
Since 1950, the S&P 500 has posted positive returns during this seven-day stretch nearly 80% of the time. The average gain over this period? Roughly 1.3%, far outpacing the typical weekly return for the index. For context, if every week delivered that level of performance, it would translate to over 67% annualized returns—a staggering figure compared to the historical average of 8-10%.
While there's no single explanation for why this happens, several factors consistently contribute to this phenomenon:
Tax-Loss Harvesting Ends: investors often sell underperforming stocks in December to lock in losses for tax purposes. Once this selling pressure subsides, markets stabilize and often rally as buying resumes.
Lower Trading Volumes: with many institutional traders on vacation, trading volumes tend to be lower during this period. This reduced activity often leads to less resistance for upward momentum.
Optimism Around the New Year: the holidays bring an air of optimism, and happy people tend to spend more money and buy more stocks
Year-End Bonuses and Retail Participation: many retail investors put year-end bonuses to work in the market, adding liquidity and demand during the holidays.
Window Dressing by Fund Managers: fund managers may "dress up" their portfolios by buying high-performing stocks to present a favorable year-end snapshot to investors.
And while there are no guarantees in this game, I expect 2024 to have another fabled Santa Rally for a few reasons.
Why It’s Likely to Happen Again
This year, the conditions are particularly favorable for a Santa Rally:
Falling Interest Rates: Central banks worldwide are pivoting to more accommodative monetary policies, reducing borrowing costs and fueling growth. Lower rates also drive capital out of bonds and into equities.
Global Liquidity Boom: Central banks cutting rates simultaneously creates a flood of liquidity in the financial system, a proven tailwind for risk assets like stocks and crypto.
Pro-Business Environment: With a pro-business administration coming into Washington, market sentiment is high as deregulation and potential tax cuts add to the bullish outlook for equities.
Strong Fundamentals: This year’s earnings season was robust, with S&P 500 earnings growing 5.8% year-over-year. Combined with resilient GDP growth and cooling inflation, this creates an environment ripe for equity gains.
And I have a few ways to take advantage of this Santa Rally.
Five Positions to Ride Santa's Sleigh
We nailed the Santa Rally last year.
We added upside leverage to our portfolio via the ProShares UltraPro QQQ (TQQQ). This was a good call, as we closed this position for a +20% gain in under a month.
But this year, I want to do something different...