What is it and will it occur this year?
As the new year draws closer, eyes are turning to Wall Street to see whether it will pull off the coveted Santa Claus rally. The so-called rally — coined by Yale Hirsch, founder of the Stock Trader’s Almanac, in 1972 — occurs between the last five trading days of the year and the first two of the new year. In this case, that would be from the opening bell on Dec. 24 until the second trading day of 2026, or Jan. 5. Since 1950, the S & P 500 has recorded an average gain of 1.3% over the course of the seven-day trading period, and this year, the index should add to that, according to Jeffrey Hirsch, editor-in-chief of the Almanac. “We’ve seen this opening part of the month choppy and a mid-December low, [which is] very typical of December trading,” he said in an interview with CNBC. “I think that sets up a Santa Claus rally.” Hirsch added that the index’s rise on Thursday and Friday “doesn’t take anything away” from such a rally coming to fruition. .SPX YTD mountain S & P 500, year-to-date The S & P 500 broke a four-day losing streak on Thursday, supported by a cooler-than-expected consumer price index reading for November and optimism surrounding Micron Technology’s outlook as the company experiences high artificial intelligence memory demand. Enthusiasm for the AI trade propelled the index even higher during Friday’s session. Heading into next week, the broad-based index is marginally lower on the month so far, bogged down in part by volatility in the AI trade. It has still advanced more than 16% this year. To be clear, Hirsch doesn’t believe that there needs to be stability in the AI trade for the Santa Claus rally to occur, especially given the recent rotation into other areas of the market such as financials and industrials — two of only four S & P 500 sectors that are on track for a winning month. That said, though the rally doesn’t necessarily “depend” on that stability, it would “shore it up for sure,” he added. Hirsch thinks it’s still possible for S & P 500 to hit 7,100 by the end of the year, a level that implies almost 5% upside from Thursday’s closing price. If the Santa Claus rally were to not take hold, investors should ultimately take it as a “warning sign,” he said. “It’s not, ‘We’re going to have a bear market.’ It’s a flag to start looking at the other data — whether it’s seasonal indicators [or] other indicators, fundamental or technical,” Hirsch said. “It’s a warning that the usual bullish end-of-year Santa Claus rally is not happening, [so] maybe something’s up.”
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