The Festive Season: A Time for Cheer and Market Optimism
As the holiday season approaches, investors are eagerly anticipating the traditional year-end rally. With two short trading weeks on the horizon, it’s essential to examine the historical data to understand how stocks tend to perform during this period.
A Bullish Trend: Christmas and New Year’s Weeks
The S&P 500 Index has consistently demonstrated a bullish trend during the weeks of Christmas and New Year’s. Over the past 50 years, the index has averaged a return of 0.55% during the week of Christmas, with 62% of the returns being positive. New Year’s has been even more impressive, with an average return of 0.66%. These holiday weeks have significantly outperformed the typical weekly return for the S&P 500, which stands at 0.17%.
The Santa Claus Rally: A Defined Phenomenon
While the term “Santa Claus Rally” is often used to describe the general outperformance of stocks at the end of the year, it was first coined by Yale Hirsch, the founder of the Stock Trader’s Almanac, in 1972. According to Hirsch, the Santa Claus Rally specifically refers to the first two trading days of the New Year and the last five trading days of the previous year.
Historical Performance: A Bullish Time
Over the past 50 years, the S&P 500 has averaged a return of more than 1% during these seven trading days, with positive returns 74% of the time. This is significantly higher than the typical 7-day return for the index, which stands at 0.26% with 58% of the returns positive.
Top Performers: Stocks to Watch
The following table lists the S&P 500 stocks that have performed exceptionally well during the Santa Claus Rally over the past 10 years, sorted by percent positive and average return. Newmont (NEM) tops the list, averaging a return of more than 4% with 90% of the returns positive. Real estate and healthcare companies also feature prominently on the list.
| Stock | Average Return | % Positive |
| — | — | — |
| NEM | 4.13% | 90% |
|… |… |… |
Underperformers: Stocks to Avoid
On the other hand, some stocks have consistently underperformed during the Santa Claus Rally. CME Group (CME) tops this list, finishing positive just one time out of 10 during these seven trading days. Mega-cap stocks such as Microsoft (MSFT), Nvidia (NVDA), and Apple (AAPL) also feature on this list, along with several information technology companies.
| Stock | Average Return | % Positive |
| — | — | — |
| CME | -2.15% | 10% |
|… |… |… |
As the holiday season approaches, investors would do well to keep an eye on these stocks and trends, potentially positioning themselves for a festive rally.
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