For Stocks, a Bummer Year Gets Brighter
This is typically the sweet spot of the year for stocks. The question is whether the 2005 version will feature real sugar or just Sweet'N Low.</br></br>With surprising frequency, the period from November through early January is the strongest for stocks, often providing the majority of the annual gain. So far, the pattern is repeating this year.</br></br>From January through October, the Dow Jones Industrial Average fell 3%. Since then, it is up 3%, leaving the Dow barely changed this year, off 0.2%. On Friday, the Dow rose 0.4%, producing a gain of 0.8% for the week. The Dow finished at an eight-month high. The Standard & Poor's 500-stock index and the Nasdaq Composite Index, up similar amounts on the day, hit 41/2-year highs.</br></br>Why year's end is so good for stocks has long been a subject of debate. Some trace it to days when farmers withdrew money to finance a harvest in late summer, then deposited profits afterward. Others point out that many companies, not just retailers, do the bulk of their business and make their largest profits at year's end, as clients buy for the new year. Markets tend to rise ahead of expected January investment of retirement money in stocks. And crude-oil prices have a way of falling at year's end, after the summer driving season, easing inflation fears. That is happening now -- with crude oil down to a five-month low of $56.14 a barrel last week -- and also happened last year.</br></br>Whatever the reason, a lot of money managers are counting on a 2005 year-end rally to save their portfolios from decline and leave them in the black, looking like heroes to clients. Little wonder that Wall Street calls the late-year stock surge a Santa Claus rally.