“Santa Claus Rally” starts strong as the S&P 500 crosses the 6,000 mark again

Topline

Tuesday marks the start of a historically merry period for investors, a phase commonly known as the “Santa Claus rally” as stock markets typically produce positive returns during the holiday season, potentially bringing further gains for a largely merry 2024 for stocks.

Santa Claus visits the New York Stock Exchange.

AFP via Getty Images

Important facts

The Santa Claus rally refers to the historical tendency for stocks to rise around the Christmas holidays, and the term typically refers to the last five trading days of a year and the first two trading days of the following year.

This makes Tuesday the official start of the Santa Claus rally, which ends next Friday (January 3rd).

According to Adam Turnquist, chief technical strategist at LPL Financial, the S&P 500 index has gained an average of 1.3% during the seven-day Santa Claus rally since 1950, far more than the index’s average seven-day return of 0.3%.

Aside from the cheerfulness among fund managers and other market participants, the phenomenon is due to low trading volume and a lack of potentially damaging economic and earnings reports, although cheerfulness among investors plays a role.

The Santa Claus rally got off to a good start with the S&P rising 1.1% on Tuesday, posting its best Christmas Eve performance in 50 years.

Is the stock market open today?

Yes. The New York Stock Exchange and the Nasdaq will each be open half-day, closing at 1 p.m., while bond markets will close at 2 p.m. and major U.S. financial markets will remain closed until Thursday’s normal trading session.

Important background

Before Santa Claus came down the chimney on Wall Street on Tuesday, it was already a good year for stock investors. The S&P rose more than 25% in 2024, marking its first consecutive annual gain of 20% since 1998, according to FactSet. Much of the gains were driven by continued optimism around generative artificial intelligence and the first interest rate cuts since 2020.

What you should pay attention to

Wall Street strategists widely expect 2025 to be another year of strong returns for investors, with companies like Bank of America, Goldman Sachs and Morgan Stanley each predicting another record rise for the S&P.

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