Instead of sitting back with a glass of egg nog and overdosing on Rankin/Bass holiday specials, some investors spend year-end trying to decorate their portfolios with dubious investment ideas. Here are four holiday follies that are even nuttier and harder to digest than fruitcake.
Santa Claus Rally
Yes Virginia, there may be a Santa Claus, but don’t count on a Santa Claus Rally — a small upward blip in stock prices that sometimes occurs between Christmas and New Year’s. Explanations for the rally, which was “discovered” in 1972, include bears and other pessimists giving in to the holiday spirit, year-end tax planning, even investors spending Christmas bonuses. Continue reading
Distribution of Rolling 5 Year Correlations with S&P 500 1999-2014
Source: Morningstar Direct, May 2014. Past performance is no guarantee of future results. Returns analyzed assume reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio.
2013 was a great year for investors. Stock markets in all 24 developed countries had positive returns, with Greece being the best gaining 49%.
What may be surprising to many investors is that the PIIGS (Portugal, Italy, Ireland, Greece and Spain), which were in financial turmoil during the last few years, were among the top performers in 2013. The BRICs (Brazil, Russia, India, and China), which had strong GDP growth, were among the bottom performers.
Chart 1: 2012 GDP Growth Rate and 2013 Market Return
Source: World Economic Outlook Database October 2013, Morningstar Direct January 2014.