Bah, humbug. It’s only the first week in November and already the holiday-themed ads are bludgeoning consumers.

Yes, the commercialization of Christmas every year is annoying. However, as a pragmatic investor, you should grit your teeth and welcome it. As November gets underway, the stock market is entering a seasonally favorable period.

You’ve probably heard of a phenomenon known as the “Santa Claus rally.” Definitions vary, but the Santa Claus rally generally refers to market gains that happen in the week leading up to Christmas. However, the season’s upward bias often lasts longer, from November through December and into the first few days of the new year.

The holiday season tends to fuel greater consumer spending and economic activity. This increased spending can boost the revenues and earnings of many companies, which, in turn, can boost stock prices.

Many investors and fund managers also engage in tax-loss harvesting during the end of the calendar year, which involves selling underperforming investments to offset capital gains, which can lead to increased trading activity and potential market gains.

Institutional investors pursue “window dressing” during this time of year, a practice where they buy or sell securities to make their portfolio look better on year-end financial statements. This can place buying pressure on certain stocks.

Institutional investors also tend to allocate capital at the beginning of the year and may make portfolio adjustments during the holiday season in preparation for the new year.

These ingredients can all add up to stock market gains in the fourth quarter, including a Santa Claus rally that’s centered around Christmas week. Santa doesn’t always come to town, but this year, he seems predisposed for a visit.

Santa, baby…

As the classic song goes:

Santa baby, I want a yacht and really that’s not a lot
Been an angel all year
Santa baby, so hurry down the chimney tonight…

Evidence suggests we’ve witnessed the bottom of the stock market’s autumnal slump and the stage is being set for a holiday surge.

Stocks are rebounding this week, propelled by the Federal Reserve’s latest “pause” on interest rates and fresh economic data that point to a resilient (but not overheated) economy.

Supporting the narrative for a Q4 rally is the recent descent of government bond yields, especially on the long end of the spectrum, The benchmark 10-year Treasury yield on Thursday fell to 4.67%, down from its dangerous flirtation with 5.0%.

Thursday brought a flurry of positive economic reports that showed growth coupled with disinflationary trends, a combination that’s the best of both worlds.

The U.S. Bureau of Labor Statistics reported Thursday that labor productivity in the nonfarm business sector in the third quarter of 2023 posted a healthy rise of 4.7%, a pinnacle not witnessed since Q3 2020. Simultaneously, hourly compensation in the nonfarm business sector rose by a solid 3.9%.

For inflation fighters, the salient statistic was the descent of unit labor costs, measuring the expenditures businesses disbursed to extract a solitary unit of output. These costs plummeted by 0.8% in the third quarter, which means heightened productivity outpaced the wage surge, thereby yielding a lower cost per unit of output for employers.

This continued surge in labor productivity, coupled with robust employment, is an auspicious portent for future gross domestic product (GDP) readings, on the heels of strong Q3 GDP readings. Moreover, the moderation in unit labor costs augurs well for subdued inflation readings into the foreseeable future.

WATCH THIS VIDEO: Stock Market Outlook 2024: The Perils and Profits Ahead

In a separate report, the Department of Labor reported Thursday that initial jobless claims came in at 217,000, a tad above the expected 210,000. However, these claims, when viewed through a historical lens, remain astonishingly low, averaging just below 230,000 throughout 2023. This starkly contrasts with the long-term average since 2000, which hovers around 380,000, a testament to the labor market’s resilience.

The preceding day’s ADP private-payroll report showed that private employers added 113,000 jobs in October, surpassing the previous month’s 89,000, but shy of the expected 135,000.

In further good news for inflation fighters, the ADP report underlined a deceleration in wage growth, with year-over-year changes in pay for those retaining their positions ascending by a modest 5.7%, while job-changers enjoyed an increase of 8.4%. These figures were the softest since 2021, mirroring the third-quarter unit-labor-cost data, and signaling a sustained moderation in inflation over the coming months.

Also on Thursday, the Commerce Department’s Census Bureau reported that factory orders rebounded dramatically, up 2.8% month-over-month in September, versus 2.4% expected.

The steep fall of the CBOE Volatility Index (VIX) in recent days is an encouraging sign that the bears are in retreat (see chart).

Wall Street was cheered by the latest batch of economic and technical data, especially the decline in the 10-year yield. The main U.S stock market indices closed sharply higher Thursday as follows;

• DJIA: +1.70%
• S&P 500: +1.89%
• NASDAQ: +1.78%
• Russell 2000: +2.67%

Earnings season so far has been promising, with several bellwethers surpassing estimates.

The latest earnings highlight was Apple (NSDQ: AAPL). After the closing bell Thursday, Apple reported fiscal fourth quarter 2023 operating results that beat expectations on the top and bottom lines.

Apple’s Q4 earnings per share (EPS) came in at $1.46 versus the consensus estimate of $1.39, up 13% year over year. Revenue reached $89.50 billion vs. the $89.28 billion estimate, down 1% year over year. Apple’s Q4 iPhone revenue was $43.81 billion vs. the $43.73 billion estimate. Sales of the iPhone posted a September-quarter record.

On the downside, though, Apple recorded its fourth consecutive quarterly sales decline. For its just-completed fiscal year, Apple reported total revenue of $383.3 billion, down from $394.3 billion in the previous year. Mac and iPad sales have been under pressure.

Apple’s report card on Thursday was good, but apparently not good enough to please Wall Street. AAPL shares were slipping in after-hours trading.

Analysts are looking for a catalyst to suggest that the Cupertino giant can break out of its rut and the momentum still doesn’t seem to be there. That said, earnings season overall for the S&P 500 remains on solid ground.

Peace of mind amid turmoil…

Do you seek peace of mind in today’s uncertain investment climate? As you position your portfolio for next year, turn to utilities stocks. These stable, high-dividend stalwarts provide shelter from the storm.

Among the publications that I edit is our premium trading service Utility Forecaster. My colleague Robert Rapier is the chief investment strategist.

Utilities stocks offer growth, income and asset protection. That’s an unbeatable combination. The utilities sector has gotten hurt lately by rising interest rates, but it’s poised to rebound when the Fed pivots in 2024. That means value plays are ready for the picking.

But you need to pick the right ones. For our list of the highest-quality utilities stocks, click here now.

John Persinos is the editorial director of Investing Daily.

To subscribe to John’s video channel, click this icon: