You should never squelch the sense of wonderment in a kid’s life. My daughter was well into the second grade before she figured out on her own that there was no Santa Claus.

In the more innocent time of 1897, an eight-year-old girl named Virginia O’Hanlon wrote to the New York Sun, asking if there was a Santa Claus. The newspaper’s editors wrote a poignant reply that touched upon the eternal love behind the message of Christmas, to conclude metaphorically that “Yes, Virginia, there is a Santa Claus.”

That famous phrase has become part of American folklore. Which brings me to the phenomenon known as the Santa Claus rally, the tendency of stocks to rise during the last month of the year. Can we believe in the rally this year? Yes, Virginia, we can. Let’s look at the backdrop.

Adobe (NSDQ: ADBE) reported this week that U.S. shoppers during this year’s Black Friday spent 7.5% more than they did last year on the occasion.

Retail sales hit a record $9.8 billion, the report calculated. Adobe found that the best-selling category on Black Friday was electronics, including items such as TVs and smart devices. Keep in mind, Adobe doesn’t track sales made in brick-and-mortar retail stores. The company analyzes sales racked up on U.S. e-commerce websites, which in aggregate witnessed more than 1 trillion visits.

The brick-and-mortar sales figures are followed by analysis at credit card behemoth Mastercard (NYSE: MA). According to Mastercard, in-store sales climbed by only about 1% versus last year. By comparison, online sales increased by 8% year over year.

However, Adobe analysts estimate that online shoppers spent an additional $10 billion on Saturday and Sunday and a staggering $12 billion on Cyber Monday (November 27).

These latest Black Friday statistics bode well for the Christmas shopping season, and by extension the odds of a Santa Claus rally this year.

According to a report by Wunderman Thompson, six in ten U.S. shoppers hitting the Black Friday sales this past weekend were looking for Christmas presents for their friends and loved ones (see chart).

Aside from resilient retail sales, economic growth and corporate earnings remain on track, further fueling the festive feeling on Wall Street. For third quarter 2023, the year-over-year earnings growth rate for the S&P 500 has come in at 4.3%, well exceeding initial expectations, according to research firm FactSet.

For the final quarter of 2023, analysts are expecting a strong year-over-year earnings growth rate of 8.3%.

Another positive sign: The government reports that air travel this past Thanksgiving week broke all previous records. More than 2.9 million people were screened Sunday at U.S. airports, the highest number of people to go through security on a single day ever, according to the Transportation Security Administration.

The unemployment rate is at a 50-year low, consumers are feeling confident, and the “wealth effect” is kicking in. Americans may be telling pollsters that they think the economy is lousy, but their behavior says otherwise.

Whether the markets deliver a sleigh full of gains in the coming weeks or a lump of coal remains to be seen, but the odds are improving for a Santa Claus rally this holiday season.

The main U.S. stock market indices closed mostly higher Tuesday, as follows:

• DJIA: +0.24%
• S&P 500: +0.10%
• NASDAQ: +0.29%
• Russell 2000: -0.46%

Also on Tuesday, legendary investor Charlie Munger, vice chairman of Berkshire Hathaway (NYSE: BRK.A, BRK.B) and Warren Buffett’s right-hand man for nearly 60 years, died in California at the age of 99.

Of course, when the Federal Reserve meets next month, it could play the role of Grinch and surprise the market by hiking rates. But the overwhelming sentiment on Wall Street is that inflation has sufficiently cooled for the Fed to justify another “pause” in monetary tightening.

Indeed, a major factor driving stock market gains so far this month has been the collective feeling on Wall Street that we’ve witnessed peak interest rates. The benchmark 10-year U.S. Treasury yield has dropped below 4.4%, a bullish technical signal that’s a tailwind for stocks.

WATCH THIS VIDEO: How to Beat The Investment Crowd in 2024

Which brings me to the utilities sector.

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

As you position your portfolio for next year, turn to utilities stocks. The utilities sector has gotten clobbered 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.

However, 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.

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