Santa Claus rally: Difference between revisions
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{{Short description|Annual stock market calendar effect}} |
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{{Refimprove|date=October 2013}} |
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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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A '''[[Santa Claus]] rally''' is a rise in [[stock]] prices in the month of December, generally seen over the final week of trading prior to the new year. The rally is generally attributed to anticipation of the [[January effect]], an injection of additional funds into the market, and to additional trades which must, for accounting and tax reasons, be completed by the end of the year. Another reason for the rally may be fund managers "window dressing" their holdings with stocks that have performed well. |
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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> |
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| ⚫ | The Santa Claus rally |
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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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==See also== |
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* [[Financial market efficiency]] |
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* [[Sell in May]] and go away |
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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> |
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{{reflist}} |
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The [[Dow Jones Industrial Average]] has performed better in years following holiday seasons in which the Santa Claus rally does not materialize.<ref>{{cite news | url=https://www.marketwatch.com/story/2018s-stock-market-santa-rally-is-leaving-this-message-for-2019-2018-12-31 | title=Opinion: 2018's stock-market Santa rally is leaving this message for 2019 | first=Mark | last=Hulbert | author-link=Mark Hulbert | work=[[MarketWatch]] | date=January 2, 2019}}</ref><ref name=hohoho/> |
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==External links== |
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* [http://asxiq.com/blog/santa-claus-rally-backtesting-results-on-all-ords Blog - Santa claus rally backtesting results on all ords] |
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==Causes== |
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{{Econ-stub}} |
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There is no generally accepted explanation for the phenomenon.<ref name=investopedia/> The rally is sometimes attributed to the following: |
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* Increased investor purchases in anticipation of the [[January effect]]<ref name=investopedia/> |
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* Lighter [[Volume (finance)|volume]] due to holiday vacations makes it easier to move the market higher<ref name=hohoho/> |
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* 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/> |
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{{Reflist|1}} |
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* [https://www.researchgate.net/publication/281643449_Seasonality_in_Stock_and_Bond_ETFs_2001-2014_The_Months_Are_Getting_Mixed_Up_but_Santa_Delivers_on_Time_JOI_2015] |
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{{DEFAULTSORT:Santa Claus Rally}} |
{{DEFAULTSORT:Santa Claus Rally}} |
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[[Category:Stock market]] |
[[Category:Stock market]] |
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[[Category:Behavioral finance]] |
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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.