People feel good going into the holiday period. There are frequent reports in the press about how holiday sales are progressing. Consumers represent almost 70% of US GDP. Retail sales are a big fraction of total consumer spending. Christmas represents a significant proportion of retail sales.
SO, if Christmas sales are going well, the economy is likely doing well and companies are likely to be doing well. Therefore, companies must be worth more and the stock market rallies.
What's the prognosis for this year, 2005? The economy seems to be stronger than people had forecasted with the aftermath of hurricanes Katrina and Rita. Retail sales are good at the discounters and okay at the department stores. Personal income has held up and liquidity in the market place is good. My forecast? We'll have a Santa Claus rally and you can make some money before the end of the year.
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