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Holiday Influence on Markets
Wall St. Week Ahead Market Indicator
December 26, 2011



If history is any guide that the holiday influence provides momentum, then get ready for a very good next couple of weeks – the bullishness is quite evident!



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holiday influence

Upcoming Weeks

It's the holiday season! Christmas week is here – even though the market is closed Monday in observance -- and then the next week is New Year's. By looking back over some past returns to see what the holidays tend to bring for investors is quite delightfully enlightening ... it is definitely a merry time of year. It looks like sellers go home for the holidays to spend time with their families, while the buyers stick around the office to buy stocks and make money.

Next Couple of Weeks and the Holiday Influence

Below are a couple of tables summarizing weekly Dow Jones Industrial Average (DJIA) returns since 1900 (first table) and since 1980 (second table). It is broken down by Christmas week, New Year's week, and then all other weeks. Note that results are also shown for those two holiday weeks combined. Notice those holiday weeks have significantly outpaced the other weeks. Since 1980, the holiday weeks have averaged a return of 0.61%, and they were positive 65% of the time. Compare this to the other weeks, which averaged a return of 0.17%, and were positive 57% of the time. Looking over the longer term (since 1900), the difference is even more substantial (0.81% vs. 0.09%, going by average returns).

DJIA weekly returns from 1900 and 1980



The Holiday Influence is Consistently Bullish

The graph below is very pretty striking in the fact that the holiday influence is very apparent! By finding the weekly returns for each decade since 1900, and then comparing the average return of the holiday weeks (combining Christmas and New Year's) to the other weeks of the year, some interesting facts are revealed. There was not one decade in which the average return of the holiday weeks lagged the other weeks. There's not even a decade in which the returns are all that close. If history is any guide, then get ready for a very good next couple of weeks!

bullish holiday influence



Holiday Influence on Stocks

How much does the holiday influence have on individual stocks? There are certainly some that have stood out -- for better or for worse -- during holiday weeks. By going back to 2000, and observing stock returns during the end-of-year holiday season, it is quite evident to see stocks that have flourished.

The table on the left shows stocks with the highest average return. Leading the pack is Flotek Industries (FTK), which averages a 9.02% return during the holiday weeks. On the right are the stocks that have been the most consistently positive. Bunge Limited (BG) started trading in 2001, and since then, there have been 20 holiday weeks. In all those weeks, BG has suffered only one loss (New Year's week in 2007).

holiday influence on stocks



Conversely, below are the worst-performing stocks during the holiday weeks. The table on the left shows the worst stocks by average return, while the table on the right shows the worst stocks by percent positive.

worst performing stocks during holidays

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