'Santa Claus could come to town' for US stocks soon as bargain hunters dive in, a top strategist says
- US stocks could see a "Santa Rally" from recent losses as buyers jump in, according to a strategist.
- "With an oversold market, we think Santa Claus could come to town once again," Ryan Detrick said.
US stocks are set for a year-end "Santa rally" as bargain hunters dive in to snap up shares they think have fallen too far, a top strategist has said.
Carson Group's Ryan Detrick said he's expecting a rally that lasts from now into the early days of 2023, as traders take advantage of low market activity to buy the dip in equities.
"With an oversold market, we think Santa Claus could come to town once again over the next week and a half," the chief market strategist told Yahoo Finance on Wednesday.
Investors watch for holiday rallies in the final five days of a calendar year and the first two days of the next. According to Detrick, the period delivers average gains of 1.33% and a positive return 79% of the time in stocks.
So they're typically seen as a bullish signal for equities – and the markets are in desperate need of some Christmas cheer, despite gains in recent days. The three major US stock indexes have lost ground in December.
Stocks have fallen as investors assess the Federal Reserve's signaling it'll carry on raising interest rates in 2023. Higher interest rates tend to weigh on companies and their stocks, as they encourage people to save rather than spend and the cost of borrowing is higher.
But Detrick said he's expecting a Santa rally over the next five trading days, and that should reassure investors the S&P 500 won't fall back to the low of 3,577 points it hit on October 12.
"Starting Friday, stocks should go higher," he said. "If they don't, that potentially could be a warning sign that something's off."
"Believe me, we've got a lot of things wrong with this year so far — but we do think that October low is the low of the bear market," Detrick added.
As 2022 draws to a close, those indexes look set to break a three-year run of wins and book their worst year since 2008. The S&P 500 is down 19% for the year, while the Dow Jones Industrial Average is 8% lower and the Nasdaq has plunged almost 32%.