It’s beginning to look a lot like Christmas for the stock market, which may be headed for a “Santa Claus Rally,” according to analysts, including at Goldman Sachs and Citadel Securities.
“Barring any major shocks, it will be hard to fight the overwhelmingly positive seasonal period we are entering and the cleaner positioning set-up,” Goldman Sachs Group Inc.’s trading desk team said in a client note, as reported by Bloomberg. “While we don’t necessarily see a dramatic rally, we do think there is room to go up from here into year end.”
Scott Rubner of Citadel Securities agreed, noting: “Following a year of strong portfolio returns and record household wealth, retail participants enter 2026 with both conviction and balance-sheet capacity to increase market participation.”
Markets saw a pickup in volatility from November to mid-December, but that volatility appears to be easing, Ethan Feller, stock strategist at Zacks Investment Research, told Fast Company.
“At the same time, major indexes are consolidating just below record highs. Taken together, those conditions tilt the odds toward a ‘Santa Claus rally’ this year,” Feller said.
Here’s what to know about the so-called Santa rally.
What’s a “Santa Claus rally”?
The term refers to a rally in the last five trading days of the year and the first two of the next year. On those days, the S&P 500 Index has gained an average of 1.3% about 79% of the time since 1950, according to Investopedia.
With those odds of nearly 80%, the likelihood is pretty good, but not guaranteed. On Wall Street, the saying goes, “If Santa Claus should fail to call, bears may come to Broad and Wall.” Meaning, if there is no rally, that can be a bad sign for the year ahead.
There are a few general theories about why this year-end rally exists, including: holiday spending, year-end bonuses that get recirculated into the market, general holiday optimism, and end-of-tax-year considerations.
How is the S&P 500 Index performing now?
At the close of afternoon trading on Friday, December 19, the S&P 500 Index was up nearly 1% at 6,834.50, well above the 6,000 threshold. It closed up 0.8% on December 18, after four straight days of losses.
What are some risk factors this year?
There are some reasons for concern. Some analysts told Barron’s it is too early to tell if there will be a “Santa Claus rally” before those five days start on December 24, as they are still assessing how inflation, the labor market, consumer spending, and future Fed rate cuts could pave the way for Santa’s return.