Will We See an Easter Bunny Rally?

The question of the month was will we get a Santa Claus rally? And I think with the performance over December, we can confidently say that didn’t happen. One of the main reasons is that the Federal Reserve has held firm that it will not bend until inflation is back down to 2%, which is a good and bad thing for markets.

A Santa Claus rally describes a sustained increase in stock prices that occurs in the week leading up to the end of the year. It is theoretically caused by people’s end-of-year retirement contributions, Wall Street’s week off (which causes the market to be more saturated with optimistic retail investors), and people’s year-end bonuses.

So that is a Santa Claus rally, it’s simply a random occurrence where stock prices are supposed to go up because there is new money coming into the market and less pessimistic institutions playing (selling) in that market.

This year, more people have had their wallets stretched so they couldn’t make as many contributions, end-of-year bonuses were cut, and institutions are more active because we live in a period of higher volatility.

We are patiently waiting for the Federal Reserve to end its hiking cycle and that is what everyone else is waiting for as well. So maybe we won’t a Santa Claus rally but we could possibly have an Easter Bunny rally.