It's December and time to deck the halls with boughs of holly, or in CNBC's case, the business channel with chatter of a potential Santa Claus rally and 2019 fortunes.
Santa's performance for the Dow Jones Industrial Average has been fairly reliable over the past five years, with investors rewarded in every year except 2015. But in each of the years when Santa delivered the goods, the market was already trending higher — 2015, the exception, saw a weaker market so Santa stayed away.
The Dow pattern in 2018 is also lower but with jagged highs and lows, leaving some nervousness about whether investors will be left empty-handed.
There is no doubt it will take a big bag of quadruple points for the Dow to rally to 26,950 points, the October high. But it is not impossible that a dose of Christmas magic will be sprinkled on the index given the erratic trade we've witnessed.
Federal Reserve Chairman Jerome Powell played his role last week, transforming from Christmas Grinch to peaceful dove when he said U.S. interest rates were closing in on neutral levels. Powell's olive branch may have encouraged the Dow to bid farewell to recent lows, but is it enough to sweep the index 11-percent higher in one month, or more than 2600 points from its lows, to reclaim the highs?
Tactically, many are open to the prospect.
"The market fall in the last six weeks has discounted many of next year's problems. A bit of good news or just an absence of bad news could drive over-sold markets higher," said David Miller, executive director of Quilter Cheviot Investment Management.
