The Santa Claus Rally refers to a historically observed stock market phenomenon where U.S. equity markets tend to perform well during the last five trading days of the year and the first two trading days of the new year. Historically, the average gain during this seven-day period is around 1.3%.

As time has gone on, largely thanks to bullish optimism, the Santa Claus Rally has extended in both duration and upside. Today, the Santa Claus Rally rally begins as early as November 25 and lasts through the end of the year. During this modern-day version of the Santa Claus Rally, the average S&P 500 return is double at 2.6%.

Origins of the Santa Claus Rally

The term was popularized by Yale Hirsch, the creator of the Stock Trader’s Almanac, in the 1970s. Hirsch observed this recurring pattern of market strength during the holiday season and dubbed it the “Santa Claus Rally.”

Keep reading this article on Financial Samurai.

Leave a Reply