Like many industries and professions, the investment sector bears a fair amount of seasonality.
The late November to early January period is an excellent example. With tax loss selling activity, and a gradually winding-down equity market, as institutional and individual investors close their books for year end trading and in preparation for the holiday season and vacations, markets become very volatile. However, the choppy stock market trading often closes out the year with a significant upward price bias.
This traditional Santa Claus rally tends to start as the heavy tax loss selling dissipates and late year window dressing takes hold. As a result, many profitable investment opportunities frequently appear. Investors who remain alert and opportunistic, to take advantage of this seasonality, can often reap substantial incremental returns.
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