Santa Claus rally: Difference between revisions
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{{Short description|Annual stock market calendar effect}} |
{{Short description|Annual stock market calendar effect}} |
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A '''[[Santa Claus]] rally''' is a [[calendar effect]] that involves a rise in [[stock]] prices |
A '''[[Santa Claus]] rally''' is a [[calendar effect]] that involves a rise in [[stock]] prices during the last 5 trading days in December and the first 2 trading days in the following January.,<ref name=Yahoo>{{Cite web | url=https://finance.yahoo.com/news/stock-market-santa-claus-rally-morning-brief-105758501.html | title=Santa Claus Rally | first=Sam | last=Ro | work=[[Yahoo]] | date=December 24, 2020}}</ref><ref name=investopedia>{{Cite web | url=https://www.investopedia.com/terms/s/santaclauseffect.asp | title=Santa Claus Rally | first=WILL | last=KENTON | work=[[Investopedia]] | date=November 8, 2018}}</ref> According to the 2019 ''Stock Trader's Almanac'', the stock market has risen 1.3% on average during the 7 trading days in question since both 1950 and 1969.<ref name=investopedia/><ref name=hohoho>{{cite news | url=https://www.cnbc.com/2018/12/21/the-santa-claus-rally--no-ho-ho-ho--.html | title=The Santa Claus rally: No ho-ho-ho | first=Bob | last=Pisani | author-link=Bob Pisani | work=[[CNBC]] | date=December 21, 2018}}</ref> Over the 7 trading days in question, stock prices have historically risen 76% of the time, which is far more than the average performance over a 7-day period. |
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However, in the weeks prior to [[Christmas]], stock prices have not gone up more than at other times of the year.<ref>{{cite news | url=https://www.marketwatch.com/story/santa-claus-rally-is-just-another-christmas-story-2018-11-20 | title=Opinion: Santa Claus Rally is just another Christmas story | first=Mark | last=Hulbert | author-link=Mark Hulbert | work=[[MarketWatch]] | date=November 21, 2018}}</ref><ref>{{cite journal |last1=Agrrawal |first1=Pankaj |last2=Skaves |first2=Matthew |title=Seasonality in Stock and Bond ETFs (2001—2014): The Months Are Getting Mixed Up but Santa Delivers on Time |journal=The Journal of Investing |date=31 August 2015 |volume=24 |issue=3 |pages=129–143 |doi=10.3905/joi.2015.24.3.129|s2cid=155997185 }}</ref> |
However, in the weeks prior to [[Christmas]], stock prices have not gone up more than at other times of the year.<ref>{{cite news | url=https://www.marketwatch.com/story/santa-claus-rally-is-just-another-christmas-story-2018-11-20 | title=Opinion: Santa Claus Rally is just another Christmas story | first=Mark | last=Hulbert | author-link=Mark Hulbert | work=[[MarketWatch]] | date=November 21, 2018}}</ref><ref>{{cite journal |last1=Agrrawal |first1=Pankaj |last2=Skaves |first2=Matthew |title=Seasonality in Stock and Bond ETFs (2001—2014): The Months Are Getting Mixed Up but Santa Delivers on Time |journal=The Journal of Investing |date=31 August 2015 |volume=24 |issue=3 |pages=129–143 |doi=10.3905/joi.2015.24.3.129|s2cid=155997185 }}</ref> |
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In 2024-2025, the S&P 500 completed a reverse Santa Claus rally by selling off during every business day between Christmas and New Year’s, a historic first for the index.{{Citation needed|date=January 2025}} |
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The Santa Claus rally was first recorded by Yale Hirsch in his ''Stock Trader's Almanac'' in 1972.<ref>{{cite web | url=https://finance.yahoo.com/blogs/breakout/santa-claus-rally-not-believe-153852263.html | title=The Santa Claus Rally: It's Not Make Believe | first=Matt | last=Nesto | date=December 18, 2012}}</ref> |
The Santa Claus rally was first recorded by Yale Hirsch in his ''Stock Trader's Almanac'' in 1972.<ref>{{cite web | url=https://finance.yahoo.com/blogs/breakout/santa-claus-rally-not-believe-153852263.html | title=The Santa Claus Rally: It's Not Make Believe | first=Matt | last=Nesto | date=December 18, 2012}}</ref> |
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* A slow down in [[tax-loss harvesting]] that depresses prices at the beginning of December<ref name=hohoho/> |
* A slow down in [[tax-loss harvesting]] that depresses prices at the beginning of December<ref name=hohoho/> |
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* [[Short (finance)|Short]] sellers / pessimistic investors tend to take vacations around the holidays<ref name=investopedia/> |
* [[Short (finance)|Short]] sellers / pessimistic investors tend to take vacations around the holidays<ref name=investopedia/> |
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Historically, Santa Claus rallies are noticeably larger in years where the S&P 500 has risen by over 20% from January to November. This is because investors tend to avoid selling to trigger a [[capital gains tax|taxable event]] in the year. December is also positive over 70% of the time, unusually high compared to other months, for the same reason. |
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==References== |
==References== |
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Latest revision as of 04:55, 3 January 2025
A Santa Claus rally is a calendar effect that involves a rise in stock prices during the last 5 trading days in December and the first 2 trading days in the following January.,[1][2] According to the 2019 Stock Trader's Almanac, the stock market has risen 1.3% on average during the 7 trading days in question since both 1950 and 1969.[2][3] Over the 7 trading days in question, stock prices have historically risen 76% of the time, which is far more than the average performance over a 7-day period.
However, in the weeks prior to Christmas, stock prices have not gone up more than at other times of the year.[4][5]
In 2024-2025, the S&P 500 completed a reverse Santa Claus rally by selling off during every business day between Christmas and New Year’s, a historic first for the index.[citation needed]
The Santa Claus rally was first recorded by Yale Hirsch in his Stock Trader's Almanac in 1972.[6]
The Dow Jones Industrial Average has performed better in years following holiday seasons in which the Santa Claus rally does not materialize.[7][3]
Causes
[edit]There is no generally accepted explanation for the phenomenon.[2] The rally is sometimes attributed to the following:
- Increased investor purchases in anticipation of the January effect[2]
- Lighter volume due to holiday vacations makes it easier to move the market higher[3]
- A slow down in tax-loss harvesting that depresses prices at the beginning of December[3]
- Short sellers / pessimistic investors tend to take vacations around the holidays[2]
References
[edit]- ^ Ro, Sam (December 24, 2020). "Santa Claus Rally". Yahoo.
- ^ a b c d e KENTON, WILL (November 8, 2018). "Santa Claus Rally". Investopedia.
- ^ a b c d Pisani, Bob (December 21, 2018). "The Santa Claus rally: No ho-ho-ho". CNBC.
- ^ Hulbert, Mark (November 21, 2018). "Opinion: Santa Claus Rally is just another Christmas story". MarketWatch.
- ^ Agrrawal, Pankaj; Skaves, Matthew (31 August 2015). "Seasonality in Stock and Bond ETFs (2001—2014): The Months Are Getting Mixed Up but Santa Delivers on Time". The Journal of Investing. 24 (3): 129–143. doi:10.3905/joi.2015.24.3.129. S2CID 155997185.
- ^ Nesto, Matt (December 18, 2012). "The Santa Claus Rally: It's Not Make Believe".
- ^ Hulbert, Mark (January 2, 2019). "Opinion: 2018's stock-market Santa rally is leaving this message for 2019". MarketWatch.