Santa Claus rally

Short description: Annual stock market calendar effect

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][5]

The Santa Claus rally was first recorded by Yale Hirsch in his Stock Trader's Almanac in 1972.[6]

The Dow Jones Industrial Average has performed better in years following holiday seasons in which the Santa Claus rally does not materialize.[7][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

1. ↑ Ro, Sam (December 24, 2020). "Santa Claus Rally". Yahoo. https://finance.yahoo.com/news/stock-market-santa-claus-rally-morning-brief-105758501.html.
2. ↑ 2.0 2.1 2.2 2.3 2.4 KENTON, WILL (November 8, 2018). "Santa Claus Rally". Investopedia. https://www.investopedia.com/terms/s/santaclauseffect.asp.
3. ↑ 3.0 3.1 3.2 3.3 Pisani, Bob (December 21, 2018). "The Santa Claus rally: No ho-ho-ho". CNBC. https://www.cnbc.com/2018/12/21/the-santa-claus-rally--no-ho-ho-ho--.html.
4. ↑ Hulbert, Mark (November 21, 2018). "Opinion: Santa Claus Rally is just another Christmas story". MarketWatch. https://www.marketwatch.com/story/santa-claus-rally-is-just-another-christmas-story-2018-11-20.
5. ↑ Agrrawal, Pankaj; Skaves, Matthew (31 August 2015). "Seasonality in Stock and Bond ETFs (2001—2014): The Months Are Getting Mixed Up but Santa Delivers on Time". The Journal of Investing 24 (3): 129–143. doi:10.3905/joi.2015.24.3.129.
6. ↑ Nesto, Matt (December 18, 2012). "The Santa Claus Rally: It's Not Make Believe". https://finance.yahoo.com/blogs/breakout/santa-claus-rally-not-believe-153852263.html.
7. ↑ Hulbert, Mark (January 2, 2019). "Opinion: 2018's stock-market Santa rally is leaving this message for 2019". MarketWatch. https://www.marketwatch.com/story/2018s-stock-market-santa-rally-is-leaving-this-message-for-2019-2018-12-31.

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