3 Reasons Why We Get An End-of-Year Rally
The stock market tends to consistently perform well in November, right through to the end of the year. Seasonal trends aren't always reliable, but the following 3 reasons help to explain why the market usually deserves to go higher going into the new year.
1) There is limited selling in the wintertime. People don't sell very much since they are afraid to pay tax. Waiting until the new year would allow an entire additional year to go by tax free, before paying the tax man.
2) It's the holiday season. Everyone is looking for gifts to spend money on during this time of year. Starting with Black Friday, and getting ready for Christmas and New Years, there are many reasons for consumers to open their wallets which gives many companies over-sized earnings during the holiday season.
3) Hedge funds prop up their stocks. Nearing the end of the year, hedge fund and mutual funds tend to put bids under their stocks so they don't go down too much before the year ends and their results are tallied up. They want to show good performance and will try to protect their winners from year-end market volatility.