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In this week’s newsletter:
I’ve never been a fan of the “Santa Claus rally” concept. Sure, it gives pundits and financial journalists something to write about when the news flow starts to slow at the end of the year. The idea that I always preferred—a more cynical one to be sure—is “window dressing,” whereby money managers do last-minute stock market shopping in an attempt to show clients that their year-end portfolios held more of whatever it was that had worked that year. But like Santa Claus, I suppose it’s just a matter of what you believe.
The stock market goes into the final days of the year hovering at fresh record highs thanks to the alleged Santa Claus rally, adding a percentage point or so to the year’s gains. ADD LINK FOR MARKETS WRAP
This is a good time to remind investors of the disclaimer that “past performance is not indicative of future results.” Beyond that wisdom, what if the message was more along the lines of “past performance is likely to be reversed?” That question is at the heart of Jeff Ptak’s thesis, as he puts into historical perspective the tech stock rally driving the lion’s share of the market’s returns. His perspective is from relative performance of stock market sectors over time, and let’s just say that history shows a strong tendency for sectors with extremely strong relative performance to subsequently fall to the basement. Check out the article here. It’s a great read.
Speaking of stocks, big rallies, and cynicism, this week, Larry Swedroe digs into research that examines what company insiders are up to when their stock gets swept up in individual-investor hype. It turns out that company insiders (and here we are talking about legal trading by insiders) enjoy these hype-driven rallies in a different way than individual investors: They use them as a chance to cash out.
Also, this week we continue our 2026 outlooks, this time focusing on the outlook for the US dollar. If you’ve noticed that the returns on the international and emerging stock funds that you generally ignore have left your US stock funds in the dust, a falling dollar is a big part of the story. Will the dollar’s weakness continue? Here’s Morningstar’s take.
As always, be sure to visit our Markets page for our latest coverage and live stock market updates, along with our full weekly calendar of key upcoming data and e
