Are Santa Claus Rallies Real During Bear Markets?

What a Santa Claus rally is

Santa's rally refers to the tendency for the stock market, especially the S&P 500, to rally in the week leading up to Christmas on December 25 and typically takes place during the last week of December through the first few days of January. The trend of the Santa Claus rally was first identified by the analyst and founder of the Stock Trader’s Almanac, Yale Hirsch.

However, as with a number of market anomalies, the Santa Claus rally can be haphazard; there is no guarantee it will happen in the future. Historically, during a Santa Claus rally, the S&P 500 has won an average of 1.3% but certainly, it doesn't occur every year!

• From 1960 to 2020, Santa Claus rallies took place about 66.66% of the time.
• Between December 20, 2021, and January 4, 2022, the Santa Claus rally led to a 4.98% rise in the S&P 500.

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Santa Claus in Bear Markets

A bear market is generally recognized when the S&P 500 decreases by over 20% from the previous bull market peak. This year, the S&P 500 Index dropped more than 20%, from its peak at the beginning of January to its low on June 16.

• During the holiday season, between December 26, 2000, and January 2, 2001, the S&P 500 rose by 2.62%. The following year, from December 17 to 31, the ETF was up 4.47%.
• The Great Recession, which lasted 17 months between October 2007 and March 2009, witnessed two Santa Claus Rallies – a 1.32% increase during the week beginning December 17, 2008, and a 6.81% increase during the week beginning December 29, 2008.

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Those trying to explain the Santa Claus rally, focus on investor optimism that is intensified due to the spirit and Christmas shopping. More generally, the Santa Claus Rally creates exciting news and heightens traders' sense of optimism these days. Is it something you can rely on? The anticipation of ushering in the New Year with benefits is something magical, and maybe this would be the perfect gift under your Christmas tree.

Could the stock market see a Santa Claus rally late in the year, as inflation has regularly peaked, the Fed is aggressively raising interest rates and consumers are under pressure from the rate of price changes?

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Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.