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The Santa Claus Rally | Simulation Competition Update | Week 4


Christmas is finally here this week and the stock market gave us some early presents. After a bumpy start to the week, the S&P 500, FTSE 100 and the AEX all ended up in the green from Monday to Thursday. On Friday, stock exchanges remained closed or had adjusted opening hours and this led to lower volume. Cryptocurrency investors also had a good week as the total cryptocurrency market cap increased from approximately $2.1 trillion to $2.3 trillion. The cryptocurrency poster child, Bitcoin, increased a solid 8.4% in 5 days at the moment of writing. Giving it its own end-of-year rally.

The initial drop that was seen on Monday was most likely due to the lockdown that was announced in the Netherlands. As we all know only essential sectors are allowed to be open and recent history tells us that one lockdown usually leads to another in Europe. In that regard, a new report from the UK regarding the new Omicron variant was welcomed with open arms by investors. The data from the UK showed that the Omicron variant is more transmissible, but is also less severe and leads to fewer hospitalizations. Data that was in line with what we, anecdotally, have heard earlier from South Africa. Additionally, Merck and Ridgeback have had their Covid pill, which is named Molnupiravir, approved by the FDA. Hopefully, this will provide an additional boost to the markets.

On another note, gas prices reached a new high this week in Europe. On Tuesday gas delivery prices for the next month reached €181 per megawatt hour. The main reason for this was that flows from the Yamal-Europe pipeline, which is a Russian pipeline, stopped and this spooked buyers. In addition to this, there were nuclear outages in France, and Germany is set to close half its nuclear power capacity before the end of the year. Further adding fuel to the fire. Due to the high prices in Europe, tankers full of liquified natural gas that were bound for Asia have now rerouted and been sent back to Europe. Unfortunately this is unlikely to make a huge difference in the short term, so expect gas prices to remain elevated for the foreseeable future. 

Economic data from the US was slightly more positive. On Thursday the US department of labor published its weekly unemployment data. Initial jobless claims came in flat at 205k, this is slightly below the 4 week moving average, but in-line with consensus estimates. Furthermore, the University of Michigan measurement of consumer sentiment rose in December to 70.4, an increase over the November reading of 67.4. However, this is quite a bit lower than the levels seen last year. During December 2020, consumer sentiment as measured by the University of Michigan was at 80.7. 

Next week will be the last trading week of the year and usually, this is a good one. On average the last week of the year and the first two trading days of the new year have led to rising markets. On average the market has returned 1.5% during these 7 days and was positive in 76% of the years between 1950 and 2019. The rally during the last trading week of the year is sometimes also referred to as the Santa Claus rally. The term was first coined by Yale Hirsch in 1972 and is sometimes also seen as a good indicator for the next trading year. If the week is positive, the year will most likely also be positive. So keep your eyes open during the last week of the year!



The Santa Claus rally seemed to come earlier this year seeing as there were only 6 out of the 44 groups who had a negative weekly result. A special shout-out must be made to Bullseye International, from being the biggest faller last week to the biggest riser this week. Let's just say they enjoy volatility. On the sad side of things; Batavia investments is stone dead last. It seems that the ship with which they claim to sail past the competition is missing its sail and is on the verge of sinking. To all: I hope you had an enjoyable Christmas dinner. However, more likely dinner with family causes immense frustrations. I hope you use your build up frustrations from said dinner into prosperous investments for the last weeks. This will be the last Investment competition update of this year so I wish all a lovely end of the year and a better 2022!



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