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Heading into the final week of the year, markets are bracing for the so-called Santa Claus rally. The Santa Claus rally refers to the increase in stock prices in the final week of the calendar year (i.e., between Christmas and New Year’s Day) that extends into the first two days of the New Year. According to the Stock Trader’s Almanac, a Santa Claus rally has occurred 59 times since 1950 and the S&P 500 has risen 1.3% on average during this period.
While most of the stocks will see a nice boost, we have highlighted five stocks that are expected to outperform in the seven-day period and are intriguing choices for a short spell. Notably, high-beta and high-momentum stocks are expected to lead the market in the weeks ahead.
We have chosen the five stocks using the Zacks Screener. These have a Zacks Rank #1 (Strong Buy) or 2 (Buy), a Momentum Score of B or higher, a market cap of more than $100 million, a beta greater than 2 and a Zacks Industry Rank within the top 45%.
High-beta stocks experience larger gains than their broader market counterparts in a bullish market, while momentum investing looks to capture profits from buying hot stocks, which have shown an uptrend over a few weeks or months.
Santa On The Way!
The rally looks more real this year, given that the Fed has boosted optimism in the stock market by indicating deeper rate cuts than expected for the next year. The central bank, in its latest meeting, kept interest rates steady for the third time and penciled in three rate cuts of a total of 75 bps for the next year. Previously, the Fed had forecast two rate cuts in 2024. This has spread huge optimism in the stock market, driving the major indices to new highs.
Markets have been pricing in a nearly 60% chance that the Fed will begin to cut rates at its March meeting, up from 40% the day prior, per the data from CME Group.
Americans are feeling more confident about the economy than they did over the past few months, heading into Christmas. Consumer sentiment rebounded sharply in early December as worries about inflation receded. Retail sales also posted surprise growth in November after declining in the prior month. The data points to resilient consumers and a strong start to the holiday season, indicating that Santa is on the way.
Year-end seasonal factors such as holiday optimism, tax-related affairs, investment of Christmas bonuses, mutual fund manager window dressing and the “January effect” will also continue to push stocks higher.
Stocks to Bet on This Festive Season
Mesoblast is a global leader in developing innovative cell-based medicines. The company has leveraged its proprietary technology platform, which is based on specialized cells known as mesenchymal lineage adult stem cells, to establish a broad portfolio of late-stage product candidates.
With a beta of 3.33 and a market cap of $172.6 million, the stock belongs to a top-ranked industry (in the top 27%). Mesoblast has a Zacks Rank #2 and a Momentum Score of B.
Coinbase is the largest U.S. cryptocurrency exchange, trading some 50 different digital assets. It has a market cap of $38.56 billion and a beta of 3.05. The stock belongs to a top-ranked industry (in the top 9%).
Coinbase carries a Zacks Rank #2 and has a Momentum Score of B.
Western Gas was formed to own, operate, acquire and develop midstream energy assets. It has a market cap of $10.6 billion and a beta of 2.71.
Western Gas belongs to an industry that is ranked in the top 1%. It has a Zacks Rank #1 and a Momentum Score of A.
JAKKS Pacific is a multi-brand company that has been designing and marketing a broad range of toys and consumer products since 1995. With a market cap of $367.2 million, JAKK has a beta of 2.45.
JAKKS Pacific belongs to a top-ranked industry (in the top 36%). It has a Zacks Rank #1 and a Momentum Score of B.
Brinker International owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) brands. It has a market cap of $1.8 billion.
Brinker International has a solid Zacks Industry rank in the top 21% and has a beta of 2.30. It has a Zacks Rank #1 and a Momentum Score of B.
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5 Stocks to Ride the Santa Claus Rally
Heading into the final week of the year, markets are bracing for the so-called Santa Claus rally. The Santa Claus rally refers to the increase in stock prices in the final week of the calendar year (i.e., between Christmas and New Year’s Day) that extends into the first two days of the New Year. According to the Stock Trader’s Almanac, a Santa Claus rally has occurred 59 times since 1950 and the S&P 500 has risen 1.3% on average during this period.
While most of the stocks will see a nice boost, we have highlighted five stocks that are expected to outperform in the seven-day period and are intriguing choices for a short spell. Notably, high-beta and high-momentum stocks are expected to lead the market in the weeks ahead.
We have chosen the five stocks using the Zacks Screener. These have a Zacks Rank #1 (Strong Buy) or 2 (Buy), a Momentum Score of B or higher, a market cap of more than $100 million, a beta greater than 2 and a Zacks Industry Rank within the top 45%.
The chosen stocks are Mesoblast Limited (MESO - Free Report) , Coinbase Global (COIN - Free Report) , Western Gas Equity Partners, LP (WES - Free Report) , JAKKS Pacific (JAKK - Free Report) and Brinker International (EAT - Free Report) .
High-beta stocks experience larger gains than their broader market counterparts in a bullish market, while momentum investing looks to capture profits from buying hot stocks, which have shown an uptrend over a few weeks or months.
Santa On The Way!
The rally looks more real this year, given that the Fed has boosted optimism in the stock market by indicating deeper rate cuts than expected for the next year. The central bank, in its latest meeting, kept interest rates steady for the third time and penciled in three rate cuts of a total of 75 bps for the next year. Previously, the Fed had forecast two rate cuts in 2024. This has spread huge optimism in the stock market, driving the major indices to new highs.
Markets have been pricing in a nearly 60% chance that the Fed will begin to cut rates at its March meeting, up from 40% the day prior, per the data from CME Group.
Americans are feeling more confident about the economy than they did over the past few months, heading into Christmas. Consumer sentiment rebounded sharply in early December as worries about inflation receded. Retail sales also posted surprise growth in November after declining in the prior month. The data points to resilient consumers and a strong start to the holiday season, indicating that Santa is on the way.
Year-end seasonal factors such as holiday optimism, tax-related affairs, investment of Christmas bonuses, mutual fund manager window dressing and the “January effect” will also continue to push stocks higher.
Stocks to Bet on This Festive Season
Mesoblast is a global leader in developing innovative cell-based medicines. The company has leveraged its proprietary technology platform, which is based on specialized cells known as mesenchymal lineage adult stem cells, to establish a broad portfolio of late-stage product candidates.
With a beta of 3.33 and a market cap of $172.6 million, the stock belongs to a top-ranked industry (in the top 27%). Mesoblast has a Zacks Rank #2 and a Momentum Score of B.
Coinbase is the largest U.S. cryptocurrency exchange, trading some 50 different digital assets. It has a market cap of $38.56 billion and a beta of 3.05. The stock belongs to a top-ranked industry (in the top 9%).
Coinbase carries a Zacks Rank #2 and has a Momentum Score of B.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Western Gas was formed to own, operate, acquire and develop midstream energy assets. It has a market cap of $10.6 billion and a beta of 2.71.
Western Gas belongs to an industry that is ranked in the top 1%. It has a Zacks Rank #1 and a Momentum Score of A.
JAKKS Pacific is a multi-brand company that has been designing and marketing a broad range of toys and consumer products since 1995. With a market cap of $367.2 million, JAKK has a beta of 2.45.
JAKKS Pacific belongs to a top-ranked industry (in the top 36%). It has a Zacks Rank #1 and a Momentum Score of B.
Brinker International owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) brands. It has a market cap of $1.8 billion.
Brinker International has a solid Zacks Industry rank in the top 21% and has a beta of 2.30. It has a Zacks Rank #1 and a Momentum Score of B.