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As 2016 draws to a close, economic forces that are mostly tied to a Santa Claus rally are being felt on the Wall Street way before Christmas. The U.S economy expanded at an encouraging pace while consumer confidence gathered strength in recent times, which will provide the much-needed boost to the broader markets in December.

But, it’s also the outspoken, Armani-clad populist President-elect Donald Trump who has given enough impetus to the markets with his pro-growth policies.  Oil prices, in the meantime, has gathered steam and contributed to the Trump-induced market rally. OPEC’s historic decision to trim production levels drove crude prices higher. Thus, it’s time to invest in some solid stocks which are likely to make the most of the bullish sentiments.

Santa Claus Rally Comes Early

If you are an investor, it feels like Christmas has come early this year. And why not? Both the Dow and the S&P 500 are trading at all-time highs, bond yields are scaling and the CBOE Volatility Index (VIX), a key measure of market expectations of near-term volatility, is way below the key 20 level mark. Now the question is, with stocks already scaling high, can a Santa Claus rally push them further?

Before we answer this question, we need to know what a Santa Claus rally is. It is the rise in stock prices in the month of December, generally seen over the last five trading days of the passing year and the first two trading days of the approaching one. The term was first coined by market analyst Yale Hirsch in 1972 in The Stock Trader's Almanac. Performance of the market during these trading days mostly gives a fare view of how the market is likely to do in the next year.

But, many analysts and commentators have been using the term to refer to the period from the beginning of December, or even as early as “Black Friday”, to Christmas. And this time around, the markets have started to do well banking on strong GDP and, there you have it, a Santa Claus rallyConsumers have also shown their confidence in their financial future and are willing to spend more, which usually triggers a Santa Claus rally.

Holiday spending rose 9% during Thanksgiving and Black Friday combined, compared with the same two-day period last year, according to First Data. As per Adobe Digital Insights, Cyber Monday online sales increased 12.1% this year compared to 2015, due to massive growth in mobile traffic and sales (read more: 4 Top eCommerce Stocks for the Holiday Season).

GDP Growth, Consumer Confidence Strong

The U.S. economy expanded faster than expected in the third quarter. According to the Commerce Department’s second estimate, GDP increased 3.2% in the third quarter. This is a considerable improvement over the advance estimate of 2.9% and higher than the expected pace of 3%. Consumer expenditure, the powerhouse of GDP growth, increased 2.8% during the third quarter. This was significantly higher than the 2.1% estimated earlier (read more: 6 Stocks to Buy on Strong GDP Growth).

Consumer confidence made a strong rebound in November to hit a nine-year high. According to The Conference Board, Consumer Confidence Index increased from October to 107.1 in November, marking the highest since Jul 2007. Director of Economic Indicators at The Conference Board said, “Consumer confidence improved in November after a moderate decline in October, and is once again at pre-recession levels... A more favorable assessment of current conditions coupled with a more optimistic short-term outlook helped boost confidence” (read more: 4 Retail Stocks to Buy on 9-Year High Consumer Confidence).

Trump Trade to Boost Santa Rally

December is more or less a decent month for stocks, which are often buffeted by a Santa Claus rally. The first two weeks generally tend to be flattish on an average, but, stocks have ended the month of November with solid gains in a postelection Trump rally. Dow has risen 5% since the election outcome, the broad-stock benchmark S&P 500 index has climbed 3.8%, while the Russell 2000 Index of small-cap stocks which is most sensitive to economic prospects for the country, has jumped over 12%.

Such momentum, driven by expectations of market-friendly policies from Trump, is expected to add to the Santa Claus rally. There’s been a sharp run-up in the stock price of banks, healthcare, chemical, restaurants and industrial companies as investors remain bullish on Trump’s fiscal policies for economic growth. Investors anticipate lower corporate taxation and regulations, along with higher infrastructure spending under a Trump administration. The broader equity market, in the meanwhile, is also benefitting from an exodus of cash from government bonds, real estates and gold (read more: 4 Blue Chip Stocks to Buy as Trump Rally Rages On).

Crude Oil Joins the Trump Party

Oil prices also leaped as OPEC confronted its skeptics by agreeing to its first production cut in eight years on Nov 30. OPEC overcame disagreements between the group’s largest producers, Saudi Arabia, Iran and Iraq, by agreeing to trim output by about 1.2 million barrels a day by Jan 2017.

According to the Wall Street Journal, a production cut of this size could “push oil supplies below demand levels sooner than expected”. The WTI and Brent crude surged 8.52% and 8.10% to $49.44 per barrel and $46.38 a barrel, respectively (read more: OPEC Has Finally Agreed to Cut Output, Sending Oil Up 7%).

Gearing Up for a Solid End to 2016: 5 Solid Picks

Thanks to positive seasonal trend along with stocks benefiting from election related tailwinds, surely, this time around we are lining up for a strong year-end rally. December, historically, has been one of the best months of the year, with the broader market have only fallen in six years since 1984. 

Hence, it will be prudent to invest in five of the best stocks in the market that can make the most of this bullish sentiment. Such stocks have a Zacks Rank #1 (Strong Buy) and a VGM score of ‘A’. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

Burlington Stores, Inc. (BURL - Free Report) : This retailer of branded apparel products has a year-to-date return of more than 100%. The company’s expected earnings growth rate for the current year is 37.6%, more than the industry’s return of 17.7%. The Zacks Consensus Estimate for its current year earnings increased 6.4% over the last 60 days.

The Children's Place, Inc. (PLCE - Free Report) : This children's specialty apparel retailer has a year-to-date return of 88.1%. The company’s expected earnings growth rate for the current year is 41%, higher than the industry’s return of 3.9%. The Zacks Consensus Estimate for its current year earnings increased 8.3% over the last 60 days.

KVH Industries, Inc. (KVHI - Free Report) : This manufacturer and seller of mobile communication products and services has a year-to-date return of 15.7%. The company’s expected earnings growth rate for the current year is 114.3%, more than the industry’s return of 11%. The Zacks Consensus Estimate for its current year earnings soared 150% over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dean Foods Company (DF - Free Report) : This food and beverage company has yeilded a year-to-date return of 15.8%. The company’s expected earnings growth rate for the current year is 31.5%, more than the industry’s return of 26.5%. The Zacks Consensus Estimate for its current year earnings increased 3.2% over the last 60 days.

Magellan Health, Inc. (MGLN - Free Report) : This healthcare management business firm offers a year-to-date return of 18.1%. The company’s expected earnings growth rate for the current year is 160.3%, more than the industry’s return of 11.7%. The Zacks Consensus Estimate for its current year earnings rose 32.4% over the last 60 days.

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