Many investors are looking forward to this year’s “Santa Claus rally," the last week of the year when stocks rise as consumers boost spending. The fourth quarter is typically the best for overall stock market returns, lifted by optimism about the possibilities of a happy new year and strong retail sales.

According to Alan Wynne, Global Investment Strategist at J.P. Morgan, in years like 2024 where the first three quarters of the year are positive, the market tends to deliver more than double the return of an average year (6% vs. 3%). But as Wynne adds, geopolitical strife, election year mania, and Chinese economic policy moves could all throw a wrench into the works.

Early third quarter results for S&P 500 companies have been positive, with what Sheraz Mian of Zacks calls, “a reassuring read on underlying economic trends.” Insurance and brokerage/asset management companies in particular are seeing strong consumer resilience in spending patterns, and banks are reporting that their loan portfolios are in good shape. These indicators point to a healthy economy, leading to high expectations for a bountiful fourth quarter.

In this issue of the SmallCap Informer, we introduce a global luxury business that certainly passes the sniff test and could provide a defensive hedge for many portfolios. A Santa Claus rally could boost its sales as an added bonus.

Stay the course!

• DOUG GERLACH

Subscribers can read Doug's complete commentary and the in-depth profile of our recommended small company stock in the November 2024 issue of the SmallCap Informer stock newsletter. Not a subscriber? Subscribe to the SmallCap Informer and get monthly small company stock recommendations and updated buy/sell prices for each of the 45 high-quality small company stocks currently covered in the newsletter