Santa Claus

Will We See Another "Santa Claus Rally" This Year?

December 28, 2020

Michelle HolmesMichelle Holmes, CFA
AVP - Investments


Research shows that most of the stock market return comes in the last half of the month of December. This is even more pronounced when we look at the last week of the year, for what has become known as the “Santa Claus” rally.

Chart: Santa Claus Rally

What is the “Santa Claus” Rally?

A Santa Claus rally is the tendency for the stock market to rally or increase in the last week of December and the first two trading days of the New Year.  According to CFRA Research, the Santa Claus rally has yielded positive returns in 55 out of the past 74 holiday seasons. CFRA Research also notes that returns on the S&P 500, an index of 500 of the largest stocks that trade in the US, average 9.7% in years following a Santa Claus rally versus 9.0% in years without.

So, will we see another Santa Claus rally this year?

Looking Back on 2020

However, this year has been anything but life as usual. We started out the year with rising tensions between the U.S. and Iran, Australia's worst fire season ever (16 million acres burned), President Trump's impeachment trial and a new virus in China. And that was just in January.

In February, the UK finally exited the European Union and the Senate voted to acquit President Trump of his impeachment charges. Then, the virus spread beyond China and was declared a global health pandemic by mid-March. The global economy shut down and the stock market plunged, but recovered most of its loss within a few months.

The summer brought protests and with them, cries for social justice. Record wildfires raged through several states in late summer while southern states faced the worst hurricane season in years. This year was also an election year. Joe Biden was declared the winner after several days of counting ballots.

From Here On Out ...

A rising number of cases and a new strain of the virus in the UK has tempered stock returns from mid-December through Christmas Eve. However, there are a few positives which may help the year end with a Santa Claus rally. The U.S. approved the first of several vaccines to fight the COVID-19 virus and Congress passed a $900 billion fiscal stimulus relief bill.

So as we close out the year and see if the Santa Claus rally comes, remember the resiliency not only of the markets but of people in general. This year has been anything but life as usual. I wanted to take a moment to thank those who work on the front lines facing the virus, the fires, or making sure the rest of us have the things we need to live our lives. Thank you.

About the Author

Michelle Holmes, CFA

Michelle Holmes is an Assistant Vice President in Investments with Security National Bank's Wealth Management Division. A Chartered Financial Analyst® charterholder, Michelle has two decades of investment experience. She graduated from Morningside College with a Bachelor of Science in accounting, business administration and economics.