Christ-mas-time...is here...
Brian Trumbore
President/Editor, StocksandNews.com

The Holidays and Wall Street

We are now entering a period in the equity markets where two trends sometimes come into play; the January Effect and the Santa Claus rally.

The January Effect normally occurs from mid-December through mid-January and relates to small cap stocks historically outperforming large caps during this time of year.

The Santa Claus rally, traditionally, occurs during the last five trading days of the year and the first two of the new one for all stocks.

Both have become so well known among the investment community, though, that in some respects these "old saw" have been largely discounted, as the actual trading patterns have often moved up in time. While I don't have extensive data at my fingertips on the large vs. small comparison, I thought I would at least go back over the last five years and lay out the facts for the broad-based S&P 500 over the full holiday period. You can then draw your own conclusions, knowing, of course, that "event risk" is a factor for today that seldom was in the past. 9/11 changed all that.

[Following are the Friday closing numbers for the S&P 500.]

2001-2002

11/16?1138.65
11/23?1150.34 [Thanksgiving 11/22]
11/30?1139.45
12/7?..1158.31
12/14?1123.09
12/21?1144.89
12/28?1161.02
1/4/02...1172.51
1/11?..1145.60

2000-2001

11/17?1367.72
11/24?1341.77 [Thanksgiving 11/23]
12/1?..1315.23
12/8?..1369.89
12/15?1312.15
12/22?1305.96
12/29?1320.28
1/5/01?1298.35
1/12?..1318.55

1999-2000

11/19?1422.00
11/26?1416.62 [Thanksgiving 11/25]
12/3?..1433.30
12/10?1417.04
12/17?1421.03
12/24?1458.34 [Market closed 12/24]
12/31?1469.25
1/7/00?1441.47
1/14?..1465.15

1998-1999

11/20?1163.55
11/27?1192.33 [Thanksgiving 11/26]
12/4?..1176.74
12/11?1166.46
12/18?1188.03
12/25?1226.26 [Market closed 12/25]
1/1/99?1229.23 [Market closed 1/1]
1/8??1275.00
1/15?..1243.26

1997-1998

11/21?963.09
11/28?955.40 [Thanksgiving 11/27]
12/5?.983.79
12/12... 953.39
12/19?946.78
12/26?936.46
1/2/98?975.04
1/9??927.69
1/16?.961.51

*The 11/29 edition of the Wall Street Journal reports that over the past three years, the Russell 2000 small-cap index outperformed the S&P 500 by an average of 6% in December, and an additional 2% the following January.

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Wall Street History will return next week with a few thoughts on gold. Following that, the exciting tale of the Erie Lackawanna Railroad.

Brian Trumbore