Does the Santa Rally Deliver? A 20-Year Market Analysis

Does the Santa Claus Rally really exist?

The Santa Claus rally is a seasonal trading tactic that recommends acquiring stocks during the final period of the year, and retaining them until the first two trading days of January. The underlying concept behind this strategy is that investors can capitalize on the festive atmosphere and heightened optimism that often prevail during the holiday season to potentially yield profitable returns.

Does this strategy really work?

To do this, simply choose the number of years over which we want to calculate the statistic (in this example we will calculate over the last 20 years), then select the period we are interested in (i.e. 1 October to 2 January). To do this, we can select the dates from the calendar, or select the period directly from the graph by selecting the dates with the mouse. Here is the example below, on the S&P 500 index:

The first thing we see is that in this time window the trend over the last twenty years has been bullish on average. If we then look at the precise statistics, we see that over the last twenty years, in this time window, prices have performed positively in 85% of the cases, with an average return of +7.4%. Over the past twenty years, there have only been three years in this time period in which a negative performance has been recorded, one of these being in the year 2008, a year sadly remembered for the subprime mortgage crisis. So yes, the Santa rally really does exist.