Welcome to the Santa Claus rally: Morning Brief

Myles Udland
Markets Reporter

Tuesday, December 24, 2019

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Why Santa tends to be ‘nice’ for the stock market

U.S. markets are open today for just a half day of trading.

And while the rally we’ve seen this year and this month may have some investors wanting to check out for the year, one of the most popular calendar-based investing superstitions is just getting under way: the Santa Claus rally.

Through Monday’s close, the S&P 500 is up 2.6% for the month of December. In general, December tends to be one of the best months of the year for investors.

Since 1950, returns for the S&P 500 have averaged returns of about 1.5% in the year’s final months, a historical record topped only by November’s average returns during that period. This month-long relative strength often leads to folks calling any and all rallies in December a “Santa Claus rally.”

But the formal definition limits this rally to a much smaller range that covers the last five trading days of the year and the first two trading days of the new year. Which means the 2019-20 Santa Claus rally will run from today until Friday, January 3.

Data from the Stock Trader’s Almanac highlighted by CNBC shows that since 2008, the Santa Claus rally has failed to materialize just two times: in 2014 and 2015. And since 1950, the S&P 500 has gained an average of 1.3% during the Santa Claus rally.

Last year, the Santa Claus rally resulted in a 4.1% gain for the S&P 500 as the market began to pivot off the Christmas Eve lows and jump started what has turned into a stellar 2019 in which the S&P 500 is up nearly 30%.

Traders pose with Santa on the floor of the New York Stock Exchange, Wednesday, Nov. 26, 2014. (AP Photo/Richard Drew)

Of course, investors would be forgiven for not getting too excited about the prospects for a Santa Claus rally this year. All three major indexes closed at record highs on Monday for the second-straight session. In addition to the S&P 500’s year-to-date gains, the Nasdaq has rallied more than 34% and the Dow is up over 25%.

Meanwhile, blue chip names like Procter & Gamble (PG), Apple (AAPL), United Healthcare (UNH), and Microsoft (MSFT) are at record highs. The list of superlatives for this market goes on and history suggests more good times might lie ahead.

But Santa Claus comes to the stock market every year no matter what. And usually puts investors on his “nice” list.

By Myles Udland, reporter and co-anchor of The Final Round. Follow him @MylesUdland

What to watch today

Economy

  • 10 a.m. ET Richmond Fed Manufacturing Index, December 

Holiday trading schedule

  • 1 p.m. ET U.S. stock market early close

  • 2 p.m. ET U.S. credit market early close

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