So here’s the thing about Christmas Eve – while you’re probably stress-eating cookies and wondering if you bought enough gifts, the stock market decided to throw its own little party. The S&P 500 hit an all-time high of 6,920, and honestly? It’s giving major “I’m that friend who always has their life together” energy.
But before you start thinking this is just random holiday magic, let me introduce you to something called the Santa Claus rally. And no, it’s not about jolly old St. Nick buying Tesla stock (though that would be pretty on-brand for 2025).
What’s This Santa Rally Thing Anyway?
Back in 1972, some brilliant analyst named Yale Hirsch looked at market data and basically said, “Hey, stocks seem to go up around Christmas time.” He coined this “Santa Claus rally” – a seven-day stretch covering the last five trading days of the year plus the first two of the new year. Think of it as the market’s version of holiday cheer.
Why does this happen? Well, people get optimistic around the holidays (shocking, I know). Retail investors throw their bonus money at stocks, and fund managers do some last-minute portfolio prettying to impress their clients. It’s like everyone’s trying to end the year on a high note.
The Numbers Don’t Lie (Usually)
Here’s where it gets interesting: since 1950, this Santa rally has shown up 78% of the time, with an average return of 1.3%. Compare that to a typical seven-day period (0.3% average return), and suddenly Santa looks like a pretty decent investment advisor.
But – and there’s always a but – the last two years have been total party poopers. No Santa rally in 2023 or 2024. Yet somehow, the S&P 500 still managed to crush it with 24% and 23% gains respectively. So much for holiday traditions, right?
What This Means for Your 2026 Game Plan
Here’s where Hirsch got really clever with his rhyme: “If Santa Claus should fail to call, bears may come to Broad and Wall.” Basically, if we don’t get our holiday rally, next year might be rough. When Santa shows up, the following year averages 10.4% returns. When he doesn’t? A measly 6.1%.
But remember those recent years that broke the pattern? Yeah, maybe don’t bet your retirement on holiday folklore.
The Crystal Ball Says…
Market strategists are cautiously optimistic about this year’s Santa potential. The momentum heading into year-end looks solid, and there’s been some healthy rotation toward cyclical sectors (fancy talk for “different types of stocks are doing well”).
If the S&P 500 can break above its December high, we might see it push past the 7,000 milestone. That’s like the market’s version of a New Year’s resolution – ambitious but totally doable.
So while you’re unwrapping presents and planning your 2026 goals, keep an eye on whether Santa decides to show up for the markets. Your portfolio might just get the gift that keeps on giving.