This upcoming holiday-shortened week will cap off a brutal year for Wall Street as 2022 draws to a close.
US stock and bond markets will close on Monday 26th December for Christmas Day.
Earnings and economic calendars will be light as much of the business world is shut down until next year.
Traders working during the holiday season get metrics on wholesale and retail inventories, weekly jobless claims, and the latest S&P CoreLogic Case-Shiller home price index.
As investors return from a long weekend on Tuesday, hopes are high for a Santa Claus rally — a seasonal surge in the stock market that occurs in late December. However, as selling pressure remains on fears of a looming recession, the favorable seasonal pattern could be off this year.
The Santa Claus Rally is usually defined as the last five trading days of the year and the first two of the new year, with Yale Hirsch, creator of the Stock Trader’s Almanac, coining the term as early as 1972.
During that period, the S&P 500 has historically returned an average of 1.3% since 1950, according to data from LPL Financial. This compares to an average return of 0.2% for all rolling seven-day returns.
Santa Claus looks on at the 98th Annual Christmas Tree Lighting Ceremony at the New York Stock Exchange on December 1, 2021 in New York. (Photo by Bryan R. Smith/AFP) (Photo by BRYAN R. SMITH/AFP via Getty Images)
More importantly, the Santa Claus rally is often viewed as an indicator of future market performance. The S&P 500 has historically underperformed in January and the following year when a year-end rally failed to materialize, according to LPL Financial.
Yale Hirsch even prophesied, “If Santa Claus doesn’t come, bears might come to Broad and Wall.”
“It’s not too late for the Santa Claus rally, but unfortunately, positive inflation data has been overshadowed by the Fed’s harsh language and the looming recession they have orchestrated with their aggressive rate hikes,” Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance said in a note.
2022 is drawing to a close and 2022 is so far on track for its worst annual performance since the global financial crisis of 2008. It will also mark the end of three consecutive years of gains for the stock market and a dramatic fall from 2021 onwards to mark. the S&P 500 returned nearly 27%.
The story goes on
The S&P 500 historically underperforms in January and the following year absent a Santa Claus rally beforehand. (Source: Adam Turnquist, Chief Technical Strategist, LPL Financial)
Much of this is thanks to historic action by global central banks, which raised interest rates in lockstep to curb the highest inflation in decades after a period of widespread fiscal stimulus. The US Federal Reserve has hiked interest rates by a total of 4.25% this year, the highest since 1980, while signaling that further rate hikes are likely in the coming year.
After central banks announced their last hikes of the year last week, stock markets experienced their worst-ever exodus, registering outflows of nearly $42 billion, according to figures from Bank of America, Citigroup and Barclays, each of which compiled data from EPFR Global cited.
Looking ahead, there may not be much upside for equity investors next year as policymakers around the world remain adamant they will certainly continue tightening financial conditions next year until price stability is restored – a reality many of Wall have Street’s biggest names are preparing for a long road to nowhere for US stocks.
Last week, veteran hedge fund manager David Tepper said he opposed “going short on stock markets” because he feared rising interest rates will continue to hurt stocks.
“I think the ebb and flow just doesn’t make sense to me with so many central banks telling me what they’re going to do,” the founder and president of Appaloosa Management said in an interview with CNBC’s Squawk Box on Thursday.
“Sometimes they tell you what they’re going to do and you have to believe them.”
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economic calendar
Monday: No significant reports planned for publication. Markets closed for Christmas holidays.
Tuesday: Wholesale StocksMoM, November preliminary (0.5% MoM); Goods advance trade balanceNovember (-$96.8 billion exp., -$99.0 billion in previous month); retail inventoriesMoM, November (-0.1 exp., -0.2% MoM); FHFA Home Price IndexMoM, October (-0.6% exp., 0.1% mom); S&P CoreLogic Case-Shiller 20-City CompositeMoM, October (-1.40% expected, -1.24% mom); S&P CoreLogic Case-Shiller 20-City CompositeYoY, October (8.20% expected, 10.43% mom); S&P CoreLogic Case-Shiller US National Home Price Index, year-on-year October (10.65% in the previous month); Manufacturing operations of the Dallas FedDecember (-14.4 in previous month)
Wednesday: Richmond Fed Manufacturing IndexDecember (-9 in previous month); Pending Home SalesMoM, November (-1.0% exp., -4.6% MoM); Pending home sales NSAYoY, November (-36.7% MoM)
Thursday: Initial jobless claimsweek ended December 24 (216,000 in previous week), Ongoing ClaimsWeek ending December 17 (1.672 million in previous week),
Friday: No significant reports planned for publication.
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results calendar
Monday: No significant reports planned for publication. Markets closed for Christmas holidays.
Tuesday: No significant reports planned for publication.
Wednesday: Cal Maine Foods (QUIET)
Thursday: No significant reports planned for publication.
Friday: No significant reports planned for publication.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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