10 Minute Read

The Santa Claus Rally

December 14, 2016


Ho ho ho! I’m Santa, and I’m a friend to investors one and all. Matter of fact, I’m probably their best friend. My loyalty is unmatched. I deliver more gifts to stock holders than any other fictional, mythical figure.

Kids – Go ask your parents to define fictional and mythical. Hint: it means Santa is totally real!

Parents – Are you having your kids read this blog? Color me impressed! I’ll have to start working in more Paw Patrol or Daniel Tiger references.

I’m so helpful to stock prices the trading masses have even named a rally after me. Unless you’re living under a rock, you’ve no doubt heard of a Santa Claus Rally. Do you know what it is, exactly? Do you know the numbers behind it and why investors get so giddy around this time of year? If not, read on! I’m about to unveil the details in all their glory. Once you hear how gosh darn generous I am, you may even want to back up the truck and buy stocks hand over fist.

On second thought, maybe you won’t. Sometimes I leave coal for naughty investors; more on that in a bit.

December is the best performing month for the S&P 500 of the year. Due to its prominence among the seasonality crowd and the obvious tie to Old Saint Nick, you often hear pundits throw out the Santa Claus Rally as if it defines the historical bullishness throughout all of December. However: that, friends, is a misconception. For the authority on the rally, along with darn near any other seasonal influence, simply consult your nearest Stock Trader’s Almanac. If you don’t have one, maybe I’ll leave one for you under the tree on Christmas.

According to the Almanac, beginning just before or right after the market’s Christmas closing, we normally experience a brief, yet respectable, rally from the last five trading days of the year through the first two of the New Year. The S&P 500 has averaged a 1.5% gain over the seven day period since 1953. Not too shabby, if I say so myself. So you best give bulls the benefit of the doubt going into year end. They’re my buddies, and I like them almost as much as my reindeer.

You might also appreciate this graphic showing the typical path the S&P 500 follows in the month of December since 1950:Average December

Credit for the graphic goes to Ryan Detrick. He spits out stats like this frequently via Twitter. Plus, he’s a CMT. You know traders with the CMT designation are some of the coolest cats around.

Lest you think I’m infallible, I will admit to the occasional coal giving. Another phrase popularized by the Almanac is if Santa Claus should fail to call, bears may come to Broad and Wall. Occasionally, the market may be uncharacteristically weak during this seven day span, and that has proven to be quite the bad omen in the past. In fact, I served up a whole bunch of coal for investors in 2000 and 2008, and you know how those years turned out.

There you have it: a short summary of my rally.

Santa out.

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3 Replies to “The Santa Claus Rally”

  1. ScottMills ScottMills says:

    Great article, Thanks Tyler!

  2. ThomasFlohr says:

    Thank You Tyler ! Your articles relieve the tension on those long days with mouse in hand.


    Thanks Tyler

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