There has been a lot of discussions on Santa Rally and the January effect in relation to the stock market.
Let’s look at some Statistics!
Since 1999 in 5/5 cases whenever Santa rally was red January was red too…
Also there is this seasonality chart for Bear markets since 1965 which does not favor any kind of January effect
This selection of charts also shows there have been various bear markets with further sell offs in January…
But those charts don’t show the full picture. Let’s see if in the ’65-’80 bear markets the Santa Rally to January effect correlation was existent like it seems to be for post ’99?
Well it is not.. A red Santa stock market Rally was not correlated to red January neither was a red previous year.
This chart shows the compounded January returns of all years since 1960. It peaks im 1998 after ascending continuously before. So based on the available data it seems more likely we see a red January if we try to predict the future based on past performance.