Santa Claus rally 2024: a sector-by-sector guide for Australian markets

_{This article was created using AI and reviewed by the Australian editorial team for IG's audience.}

Understanding the Santa Claus rally

The Santa Claus rally is a well-documented stock market trend where prices typically rise from December 26 to January 2. With the S&P 500 historically gaining an average of 1.3% during this period, stock prices have increased about 79% of the time, making it a closely watched event.

While not a guarantee of future performance, the Santa Claus rally offers an exciting opportunity for traders to observe market movements and learn about seasonal patterns.

Key sectors to watch

Financial sector

The financial sector stands to gain from the Santa Claus rally, with increased consumer spending and borrowing during the holiday season boosting financial institutions.

• Commonwealth Bank of Australia (CBA)

The Commonwealth Bank of Australia has maintained a strong market position with solid returns. As one of Australia's largest banks, CBA benefits from higher interest rates that improve net interest margins. The holiday season often sees increased consumer spending and borrowing, which can further enhance its profitability.

• Westpac Banking (WBC)

Westpac has shown resilience in its stock performance. Similar to CBA, Westpac benefits from increased lending activity during the holiday season as consumers seek financing for purchases. The bank's strong capital position also supports investor confidence.

• Macquarie Group (MQG)

Macquarie Group has performed well due to its diversified financial services. As a global financial services provider, Macquarie is well-positioned to capitalise on increased trading activity and investment opportunities during the rally, benefiting from positive market sentiment.

Commodity sector

The Santa Claus rally often coincides with a decline in the US dollar, boosting commodity prices. As the dollar weakens, commodities priced in dollars become cheaper for foreign buyers, increasing demand. This trend has been evident recently, with significant rises in prices for key minerals like gold and copper, which are critical to many Australian miners.

• Northern Star Resources (NST)

Rising gold prices, which recently reached around $2,051 per ounce, have significantly boosted Northern Star's revenue potential and appeal to investors, making it a prime choice during the Santa Claus rally. Northern Star's emphasis on operational efficiencies and cost management helps sustain profitability amidst fluctuating gold prices, a strategy that proves especially beneficial during the heightened market activity of the Santa Claus rally.

• De Grey Mining (DEG)

De Grey Mining is set to benefit from the Santa Claus rally, significantly driven by rising gold prices that enhance the economic viability of its Hemi Gold Project. The festive season's upbeat market, especially after Northern Star Resources announced its acquisition of De Grey, sparks investor interest. The positive market sentiment during this period boosts De Grey's appeal, with its robust project fundamentals and significant exploration potential gearing up for long-term production growth.

Technology sector

The technology sector in Australia is poised for strong performance driven by increased consumer spending, heightened demand for digital solutions, and positive market sentiment.

• Xero (XRO)

Xero's ability to capitalise on increased demand for cloud accounting solutions and positive market sentiment enhances its prospects during the Santa Claus rally. The increased adoption of digital financial tools can contribute positively to Xero's stock performance.

• Wisetech Global (WTC)

As a leading provider of logistics software solutions, WiseTech Global serves major global freight forwarders and logistics providers. Its strong financial performance, high recurring revenue, and strategic product innovations make it well-suited to perform effectively.

Energy sector

The energy sector is well-positioned to benefit, driven by increased energy demand and rising oil prices during the holiday season.

• Woodside Energy (WDS)

Woodside Energy has seen a recovery in its stock price as energy demand remains strong. With ongoing global energy needs and rising oil prices, Woodside is positioned to benefit from increased production and sales, particularly during the holiday season when energy consumption typically rises.

• AGL Energy (AGL)

As one of Australia's largest energy providers, AGL benefits from the seasonal increase in energy consumption during the holidays, which can positively impact its revenue and stock performance.

• Beach Energy (BPT)

Beach Energy has been recovering from previous lows. The company is likely to benefit from increased demand for ​natural gas and oil during the colder months, coupled with a potential rebound in global energy prices.

Bonus: Afterpay (ATP)

The fintech sector is particularly attractive during the Santa Claus rally, benefiting from increased consumer spending, market sentiment, and growth in e-commerce. Afterpay is set to thrive during the Santa Claus rally, fueled by holiday spending boosts and positive investor sentiment. Its Buy Now, Pay Later (BNPL) model becomes especially popular as consumers seek convenient payment options.

The recent acquisition by Square Inc has elevated Afterpay’s stock, reflecting strong market confidence in its growth potential.