One of the most obvious seasonal trends is the so-called ‘Santa rally’ around year-end. This is a time, in the run-up to Christmas, that stocks around the world tend to rally. In this example, we are looking at the German index, the DAX over the last 15 years.

Over the last 15 years, the DAX has risen 11 times between Dec 14 and Feb 31. The largest gain has been +7.06% in 2011 and the largest loss -2.63% in 2018 when markets feared the Fed was moving too quickly on hiking rates. The percentage of winning trades has been 73.33%. The annualised return is 51.12%.

Major Trade Risks: The main risk to this seasonal pattern would be if either omicron variant fears result in strong risk-off trading or if the Fed signalled a fast pace of coming rate hikes for next year. Both of these situations could weaken stocks heading into year-end.

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