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]
The Santa Claus rally was first recorded by Yale Hirsch in his Stock Trader's Almanac in 1972.[5]
The Dow Jones Industrial Average has performed better in years following holiday seasons in which the Santa Claus rally does not materialize.[6][3]
Causes
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
- ^ 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.
- ^ 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.