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“If Santa should fail to call, bears may come to Broad and Wall.” – Yale Hirsch
It’s been a great start to December with the S&P 500 up nearly 4% heading into Friday’s session. The days surrounding the Christmas holiday have historically been some of the most bullish times of the year. Dating back to 1988, the second day before Christmas (which fell on yesterday this year) is the most bullish, with the S&P 500 rising more than 70% of the time over the past 35 years. Today marks the final trading day before Christmas and is also the first day of a period known as the Santa Claus Rally (SCR).
The Santa Claus Rally
First discovered by Yale Hirsch (creator of the Stock Trader’s Almanac), the SCR is a seven-day period that consists of the final five trading days of the year, along with the first two trading days of the New Year. As markets are closed on Monday for the Christmas holiday, today marks the first day.
Since 1950, these 7 glorious days tend to be overwhelmingly green, as the S&P 500 posts an average gain of 1.32% and is positive nearly 80% of the time. In fact, no other 7 days of the year are more likely to finish higher! The SCR period has been higher in each of the past seven years.
If these 7 days are higher, it typically bodes well for the full year. In fact, since 1950, when we have a positive SCR, the S&P 500 gains an average of 10.2% the following year and is higher 72.4% of the time. When Santa doesn’t come to town, those numbers fall to just 5% and 66.7%, respectively.
While a positive return during this period has been associated with further gains, a negative SCR has tended to precede weaker returns. Below we can see how each year fared following the SCR over the last 20 years, as well as how things turned out this year thus far.
Image Source: Zacks Investment Research
Notice how a positive return during the SCR period has tended to forecast solid yearly gains. This year was a great example, with a positive 0.8% return culminating in a staggering 23.6% rally in the S&P 500 year-to-date. Of course, no indicator is perfect; the SCR failed to predict last year’s -19.4% return. Still, it’s worth keeping track of as the SCR has shown to have some predictive power.
Stocks to Watch
Shares of Nike (NKE - Free Report) were down sharply in premarket trading on Friday morning despite reporting a quarterly earnings beat and in-line revenues. The apparel and shoe company lowered its sales forecast and will focus on cutting costs in the New Year. NKE stock has underperformed in 2023, returning investors a paltry 6% heading into today's session.
Image Source: StockCharts
Tech heavyweight Apple (AAPL - Free Report) was forced to stop sales of some Apple Watch models due to a patent dispute. The move followed orders directly from the International Trade Commission, which found that the blood oxygen sensor on certain models infringed on the intellectual property rights of medical tech company Masimo (MASI - Free Report) . AAPL shares fell slightly yesterday but have rewarded investors this year with a 50% return.
Image Source: StockCharts
Elsewhere in the tech world, semiconductor company Micron Technology (MU - Free Report) surged to a fresh 52-week high after reporting fiscal Q1 results earlier in the week. Micron beat on both the top and bottom lines, while also guiding above analysts’ estimates. MU stock has soared more than 70% this year.
Image Source: StockCharts
Final Thoughts
Today marks the first day of the Santa Claus Rally. As we saw, this seven-day stretch is typically positive and has shown predictive power over the last twenty years.
Positive seasonality represents a major tailwind for stocks. Make sure to keep an eye on how markets perform over the SCR period. From all of us here at Zacks, we wish you happy holidays and a prosperous New Year.
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Famed Santa Claus Rally Begins: Stocks to Watch
“If Santa should fail to call, bears may come to Broad and Wall.” – Yale Hirsch
It’s been a great start to December with the S&P 500 up nearly 4% heading into Friday’s session. The days surrounding the Christmas holiday have historically been some of the most bullish times of the year. Dating back to 1988, the second day before Christmas (which fell on yesterday this year) is the most bullish, with the S&P 500 rising more than 70% of the time over the past 35 years. Today marks the final trading day before Christmas and is also the first day of a period known as the Santa Claus Rally (SCR).
The Santa Claus Rally
First discovered by Yale Hirsch (creator of the Stock Trader’s Almanac), the SCR is a seven-day period that consists of the final five trading days of the year, along with the first two trading days of the New Year. As markets are closed on Monday for the Christmas holiday, today marks the first day.
Since 1950, these 7 glorious days tend to be overwhelmingly green, as the S&P 500 posts an average gain of 1.32% and is positive nearly 80% of the time. In fact, no other 7 days of the year are more likely to finish higher! The SCR period has been higher in each of the past seven years.
If these 7 days are higher, it typically bodes well for the full year. In fact, since 1950, when we have a positive SCR, the S&P 500 gains an average of 10.2% the following year and is higher 72.4% of the time. When Santa doesn’t come to town, those numbers fall to just 5% and 66.7%, respectively.
While a positive return during this period has been associated with further gains, a negative SCR has tended to precede weaker returns. Below we can see how each year fared following the SCR over the last 20 years, as well as how things turned out this year thus far.
Image Source: Zacks Investment Research
Notice how a positive return during the SCR period has tended to forecast solid yearly gains. This year was a great example, with a positive 0.8% return culminating in a staggering 23.6% rally in the S&P 500 year-to-date. Of course, no indicator is perfect; the SCR failed to predict last year’s -19.4% return. Still, it’s worth keeping track of as the SCR has shown to have some predictive power.
Stocks to Watch
Shares of Nike (NKE - Free Report) were down sharply in premarket trading on Friday morning despite reporting a quarterly earnings beat and in-line revenues. The apparel and shoe company lowered its sales forecast and will focus on cutting costs in the New Year. NKE stock has underperformed in 2023, returning investors a paltry 6% heading into today's session.
Image Source: StockCharts
Tech heavyweight Apple (AAPL - Free Report) was forced to stop sales of some Apple Watch models due to a patent dispute. The move followed orders directly from the International Trade Commission, which found that the blood oxygen sensor on certain models infringed on the intellectual property rights of medical tech company Masimo (MASI - Free Report) . AAPL shares fell slightly yesterday but have rewarded investors this year with a 50% return.
Image Source: StockCharts
Elsewhere in the tech world, semiconductor company Micron Technology (MU - Free Report) surged to a fresh 52-week high after reporting fiscal Q1 results earlier in the week. Micron beat on both the top and bottom lines, while also guiding above analysts’ estimates. MU stock has soared more than 70% this year.
Image Source: StockCharts
Final Thoughts
Today marks the first day of the Santa Claus Rally. As we saw, this seven-day stretch is typically positive and has shown predictive power over the last twenty years.
Positive seasonality represents a major tailwind for stocks. Make sure to keep an eye on how markets perform over the SCR period. From all of us here at Zacks, we wish you happy holidays and a prosperous New Year.