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vindikation
09-23-2005, 04:18 PM
This may be a stupid noob question, but wtf:

Is there any relationship between the Christmas season (more people spending money than any other time of year) and the overall stock market (index funds, stock in major consumer stores, etc)?

TGoldman
09-23-2005, 06:09 PM
It would only affect stock prices if consumers spent more or less than usual this coming Christmas season. Otherwise, the expected earnings during the holiday season are already accounted for in the company's financial statements from previous years and quarters.

squiffy
09-23-2005, 11:25 PM
Well, they say that Sept. is historically the worst month for the market indices, as a whole. And i believe Dec. and Jan. are generally pretty good. I am sure if we do a google search we can find out the best and worst months.

And I think this is mentioned in Stocks for the Long Run.

Some products and companies make most of their money in the winter months. For example, if I recall correctly, NOK sales tend to be best in the winter months, I guess because phones are often a Christmas gift for yourself or family and friends.

Even if people expect higher earnings in certain months, analysts still tend to under or overestimate earnings. No one can predict the future with perfect accuracy. So there are often positive and negative surprises.

Yes. Buy the book Stocks for the Long Run. There is a section toward the end on stronger and weaker months, stronger and weaker days, etc. Though the analysis of why that might be is not all that strong. But he at least makes some interesting points.

Dec. Jan. and Feb. tend to be good months. From 1946 to 2001, Dec. has been the best month for the S& P 500 index.

My guess is that people get Christmas bonuses and are in the holiday spirit, so they do a lot of shopping and or investing. They are on vacation and full of good cheer. Buying gifts for others. Retailers report higher profits in Dec. quarter than in Sept. quarter, and so stock prices rise.

That's one guess.

You need to be careful with the concept of what expectations have been priced into the market.

The efficient market hypothesis holds that once information is available that the market quickly incorporates that info and prices adjust.

But the market is only made up of imperfect buyers and sellers, none of whom can accurately predict the future.

I can anticipate that Dec. sales will be higher for NOK than Sept. sales, and historical data may bear this out. But it is very hard to predict exactly how or or how high those sales will be.

And if Dec. is a particularly good month, psychologically and statistically, one would expect the big positive earnings surprises to come in Dec. when major sales are being made.

So even if you expect higher sales, you cannot help being buoyed by the non-rational euphoria of Christmas. And people cannot seem to help spending more on stocks in Dec.

But this is a tendency. Not a guarantee written in stone.

squiffy
09-23-2005, 11:28 PM
Wherever you encounter human beings and human behavior, you can detect simple patterns. People may tend to eat lunch at a particular time, so that restaurants tend to be more or less crowded on certain holidays or at certain times. Traffic and rush hour can sometimes be worse at certain times than others depending on when people need to start work or when the work day ends, or when taxes need to be filed etc.

Is the post office busy at Christmas time and just before April 15? Yes. Why? Easy. Can you observe and profit from patterns in human behavior. Perhaps.

squiffy
09-23-2005, 11:30 PM
In a capitalistic consumer oriented majority Christian society like modern America, people buy a lot of Christmas gifts in Dec. Wow. Sounds like a predictable pattern.

squiffy
09-23-2005, 11:43 PM
Were the effects of hurricane Katrina "priced into the market"? Of course not, because few people could accurately predict the precise amount of damage which would occur.

But as new information about the potential and actual damage became available, oil prices and timber prices, etc. adjusted to accommodate the new information.

So the fact that the market quickly adjusts, does not mean that the market accurately predicts. Sometimes it does accurately predict, sometimes it does NOT.

Sniper
09-24-2005, 01:06 PM
[ QUOTE ]
Yes. Buy the book Stocks for the Long Run. There is a section toward the end on stronger and weaker months, stronger and weaker days, etc. Though the analysis of why that might be is not all that strong. But he at least makes some interesting points.

[/ QUOTE ]

The best book for this information is Stock Traders Almanac by Hirsh and updated yearly.

squiffy
09-24-2005, 02:36 PM
I did a web search for Stock Traders Almanac. They are selling 2004, 2005. 2006 does not come out until Oct. 2005.

Is it important to get the most recent copy? Or is there a lot of helpful info in the older issues. The newer ones sell for about $35 list. The used 2004 and 2005 for about 15 - 17.

Sniper
09-24-2005, 03:30 PM
Squiff... Its a desk calendar type of format. Obviously the most current year is the best. At this point in the year, its probably worth waiting until the 2006 edition comes out.

I would highly recommend it to anyone thinking about trying to time the market.

sammysusar
09-24-2005, 04:59 PM
i beleive the reason january historically was the strongest month was because some companies and individuals tended to make large investments at the start of the yr. People began anticipating this and the effect was pushed into december. Largely once people know the reason something occurs it tends not to occur anymore. so i dont think the effect is as pronounced anymore.