‘Tis the season for the Santa Claus Rally.
But it’s still 2020, so we can’t bank on anything going forward as it normally would. Especially with the COVID-19 pandemic still raging on, and the global economy still very much hanging by a thread.
So, amidst all this craziness, what can we expect for the markets in the final couple of weeks of the year?
And what do we need to do as affiliates to support our audiences and keep conversion rates high?
Let’s dive right in.
First Up: What Is the Santa Claus Rally?
As defined by Investopedia, the Santa Claus Rally refers to the substantial increase in the stock market that occurs in the last week of December through to the first couple of days of January.
Sometimes referred to as the December Effect, this rally takes US stocks and indices up by around 1 to 2%, and has done so for about 70% of the years since the 1960s.
Usually, the rally can cause quite a bit of volatility, and the risk-on sentiment tends to push safe havens like the yen, swiss franc, and gold lower, in favor of indices and stocks.
What Causes It?
There are quite a few theories as to why the Santa Claus Rally happens, but none are set in stone as fact.
Some analysts attribute it to the general optimism on Wall Street due to the festive spirit and holiday bonuses.
Others say it’s because big-shot institutional investors are settling their books and stepping away from their trading desks to go on vacation, leaving the markets open for average retail traders (aka your audience) who have a more bullish approach to trading.
Whatever the reason, the rally is still regarded as a market anomaly. In fact, you’ll often find articles titled “should you believe in the Santa Claus Rally?” as though they were debating the existence of the reindeer-riding, toy-distributing jolly man himself.
Regardless, this does seem to be a phenomenon that repeats itself every year. And there is certainly merit to the theory that it happens because retail traders rush to buy into the stock market early in anticipation of rising prices in January (thanks to the January effect).
So What Can We Expect this Year?
Well, as with most things in 2020, this year’s December Effect may just be a little bit different.
After all, this is the year an undercooked bat turned the world as we know it upside down.
So while we are in no place to make any sort of prediction, especially considering the unpredictability of 2020, there are several reasons to suggest that this December, Santa may not be coming to Wall Street after all.
This CNBC article sums those reasons up perfectly, but it basically boils down to the fact that we’ve already had a big November rally thanks to the COVID vaccine. And this might just steal Santa’s thunder, as they put it.
The headlines have sent a huge wave of relief and optimism through the markets, so much so that the S&P 500 has closed the month of November up by 11.2%.
What this means is that people have theoretically “stocked up” on the assets they’re interested in, making them less likely to rush to buy in the final two weeks of the year.
Everyone seems to be lying in wait, with their hopes pinned on the grand “spring reopening” that is expected after this pesky second wave of COVID - the winter edition, is over.
But It May Not Be Plain Sailing From Here
The CNBC article has an underlying ominous tone that warns the world of the “rosy” picture we seemed to have painted for ourselves.
Yes, there’s a vaccine and yes, that’s good news - but there are many concerns surrounding the roll-out of this vaccine and the effectiveness of its performance in the real world, outside the controlled circumstances of a laboratory.
We also still don’t know what’s happening with the US political situation. Will there be a peaceful transfer of power? Will the Democrats win the Senate in the Georgia run-offs (thus inevitably resulting in the rise of corporate taxes?) And what’s to come of the stimulus stalemate?
There are still many questions the markets need answered before the arrival of the “spring opening” your audiences have set their hearts on.
And the headlines are changing everyday, so it’s impossible to bank on a Santa Rally gracing us with its presence in any capacity this year.
So What Do We Do?
Well, we educate.
What we know for sure is that there is a vaccine and that the world is definitely closer to a return to a semblance of normalcy than it was back in, say, June.
We also know that there is an incoming Biden administration that has big plans to support green initiatives and the renewable energy sector.
That means your traders are going to be looking for information about stocks in relation to this broader fundamental context, and you need to provide it.
Right now, people are selling up their Zoom shares in exchange for Lufthansa stock, because they know that people are going to go back to traveling sooner rather than later.
They’re also investing in renewable energy stocks in anticipation of the new president and his policy changes.
But so long as the questions we mentioned remain up in the air, your traders are going to need information to navigate through the overwhelming headlines.
Therefore, regardless of whether there’s a Santa Rally or not, your traffic will remain high this December because retail traders are still very much active and in search of guidance during these uncertain times.
So, to keep your conversion rate high during this unpredictable final month of 2020, here’s what you do:
So there you have it! A festive, albeit slightly uneasy round-up of what’s to come in the next couple of weeks.
Now go optimize your campaigns and make sure they’re Santa Rally ready!