The holiday season brings more than festive cheer, as for investors, it may signal the start of the so-called Santa Claus rally.
The Santa Claus rally is a period between the final trading days of December and the first days of January when stocks tend to climb. While this seasonal uptick isn’t guaranteed, historical data shows that markets rise more often than not during this window, driven by investor optimism, low trading volumes and year-end portfolio adjustments.
Historically, the last five trading days of December and the first two of January have been a period of above-average stock gains, offering a short, sharp rally for markets heading into the new year.
According to the Stock Trader’s Almanac, the Santa Claus rally has delivered an average gain of 1.3 percent for the S&P 500 (INDEXSP:.INX) since 1950. The phenomenon was first documented in 1972 by Yale Hirsch, founder of the Almanac, and continues to shape investor expectations today.
As for whether 2025 will deliver a Santa Claus rally to close out the year, after a choppy first half for December, markets have shown signs that a late-year recovery is possible.
When does the Santa Claus rally start?
The Santa Claus rally typically occurs over the final five trading days of December and the first two trading days of January. For 2025, the rally window begins on Wednesday, December 24, and runs through Monday, January 5, if historical patterns hold.
This narrow window often yields modest, yet consistent, returns for investors who time the market correctly.
While the rally’s timeframe is traditionally short, its effects can ripple through the market into early January. Essentially, a strong performance during this period can set the tone for January.
However, the exact timing of the Santa Claus rally can vary. Some analysts suggest that the rally has started earlier in recent years as investors attempt to front run the effect by increasing their positions in mid-December. This shift may blur the lines between the Santa Claus rally and broader December market upswings.
Will 2025 deliver a Santa Claus Rally?
This year, the S&P 500 fell during the middle of the month following a cooler-than-expected, albeit controversial, inflation report, which raised hopes for additional interest-rate cuts next year.
Despite this downturn, analysts note that a weak start to December has often failed to derail Santa’s run. Since 1950, the S&P 500 finished the Santa Claus rally period higher in 77 percent of years, even after early-month declines. By the end of the week, the index had already regained some ground, and it continued higher in the days leading up to Christmas.
“Barring any major shocks, it will be hard to fight the overwhelmingly positive seasonal period we are entering and the cleaner positioning set-up,” Goldman Sachs’ (NYSE:GS) trading desk team wrote in a note to clients, as reported by Bloomberg. ‘While we don’t necessarily see a dramatic rally, we do think there is room to go up from here into year end.”
Jeffrey Hirsch, editor-in-chief of the Stock Trader’s Almanac and Yale Hirsch’s son, also weighed in on the markets.
“It looks like (the Santa Claus rally) is set up and we can make another high by the end of the year,” he told MarketWatch. Hirsch cited cooler inflation readings and slower job growth in November, which may give the Federal Reserve room to cut interest rates in 2026.
It remains to be seen whether these predictions will come true, or if the market will be weighed down by factors including recent volatility in technology and artificial-intelligence-linked stocks.
Is the Santa Claus rally reliable?
Despite skepticism in some quarters, historical data supports the existence of the Santa Claus rally, and it is well documented.
Historically, the Santa Claus rally has been a relatively consistent period of gains. That said, historical patterns do not guarantee results, and not every year delivers the expected results. The S&P 500 lost about half a percentage point during the Santa rally period in 2024, and consecutive losses are rare but possible.
Columnist Mark Hulbert has expressed skepticism about the event in the past, noting that there is no definitive evidence that the market consistently outperforms during this period.
“An analysis of the past century reveals that the stock market in the weeks prior to Christmas is no more likely to rally than at other times of the year. (I suggest investors) ignore any arguments based on an alleged Santa Claus Rally,” Hulbert warned in an opinion piece posted on MarketWatch in 2018.
In 2019, for example, the market experienced volatility in December, defying the usual pattern.
In a December 2025 interview with CNBC, Jeffrey Hirsch cautioned that failure to rally is not an immediate bear-market signal, but rather “a flag to start looking at the other data — whether it’s seasonal indicators or other fundamental or technical measures.”
Despite the varying takes, many investors view the rally as a psychological phenomenon — one that influences market sentiment even if the returns are marginal.
Strategies for the Santa Claus rally
Now that the Santa Claus rally seems to be underway, investors interested in joining in have a variety of options, including domestic markets, international diversification or targeted sector plays such as mega-cap tech stocks.
As always, consulting with a financial advisor and conducting thorough research remains essential. While the Santa Claus rally offers potential rewards, market conditions can shift quickly, making flexibility and prudence key to success.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.