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Santa’s run on Wall Street is coming to an end — and it should leave investors feeling pretty jolly.
The so-called Santa Claus rally, which encompasses the final 5 sessions of a calendar year and the first two of the following year, has seen both the Dow Jones Industrial Average
DJIA,
and the S&P 500 index
SPX,
post all-time highs, helping the period live up to its billing as a seasonally bullish stretch for investors.
How good has it been thus far?
The Dow’s gain from Dec. 27 through Tuesday morning sets the stage for a 2.5% Santa Claus rally, which would mark its best such advance since the 2008-09 when the blue-chip index rallied by 6.3%. However, the index needs to hold above 2% during this Santa Claus rally to achieve that mark.
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Meanwhile, the S&P 500 index is up 1.9% over the same stretch, which would represent, if it holds, its best Santa Claus rally since a 2% rise during the 2012-13 period.
Dow Jones Market Data
The Nasdaq Composite Index
COMP,
meanwhile, which was lagging behind its benchmark peers, has gained 1% during the Santa Claus rally, which is shaping up to be its best such rise for that seasonal period since a 2.1% gain 2018-19 (see attached chart).
The climb for stocks represents a bit of a cooling for at least the S&P 500 index, which started the Santa Claus rally on track for its best such run since 2000-01, according to data compiled by Dow Jones Market Data.
Although a seemingly frivolously seasonal trend to follow, the Santa Claus rally, made popular by Yale Hirsch, the founder of the Stock Trader’s Almanac, now run by his son Jeff, losses during that stretch have tended to lead to losses for the rest of January, as it did in 1999, 2005, 2008, 2015 and 2016.
To be sure, past performance is no guarantee of future performance and the statistical trends for the market’s performance post-Santa Claus rally are fairly thin.
MarketWatch columnist Mark Hulbert writes that even with statistics and theory on its side, “the Santa Claus rally doesn’t amount to a guarantee.”
