The Santa Claus trading window is a week away. 5 reasons it should deliver a stock market rally this year.

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The Santa Claus trading window is a week away. 5 reasons it should deliver a stock market rally this year.

stock :: 2024-12-19 :: source - Business insider

credit should read BRYAN R. SMITH/AFP via Getty Images

By Matthew Fox

The Santa Claus trading window officially kicks off next week, and this year's holiday period should deliver a year-end rally for the stock market, according to the chief market strategist at Carson Group.

The Santa Claus trading window refers to the last five trading days of the year and the first two trading days of the new year. This year, the Santa Claus trading window begins on December 24 and ends on January 3.

The seven-day stretch has historically coincided with a positive move in equity markets.

Historical data dating back to 1950 shows that the S&P 500 has posted an average return of 1.3% and is positive 79% of the time during the Santa Claus trading window.

And when using stock market data going back to 1928, the average gain during the Santa Claus trading window is even stronger at 1.6%, according to data from Bank of America.

Such a gain would catapult the stock market to fresh record highs.

While the stock market has seen muted returns so far in December, with the S&P 500 up 0.3% and the Dow Jones down nearly 3%, Carson Group's Ryan Detrick expects a strong bounce going forward.

There are five reasons he's staying bullish on stocks into year-end.

December is the most likely month of the year for the stock market to rise, with the month ending with a gain 74.3% of the time.
December is the most likely month of the year for the stock market to rise during an election year, at 83.3% of the time.
The stock market has never been lower in the month of December when the S&P 500 is up double digits at the midpoint of an election year, as it was in 2024.
The Fed is expected to cut interest rates on Wednesday, which will be the last big event of 2024. This opens the door for a two-week period of little to no news. "Remember, stocks tend to do well in the absence of news and this is why strength around holidays tends to occur," Detrick said.
There are signs that stocks are oversold following the Dow Jones nine-day losing streak, and in many cases near the same oversold levels that marked the bottom in stock prices earlier this year.

"Don't stop believing in a Santa rally just yet," Detrick said.