After the Rally
Even though 2008 produced the largest gains in this period, the S&P 500 fell 10.95% from January 5, 2009, at the end of the rally, to January 31, 2009. On the contrary, the Santa Claus Rally represented a turning point for the S&P 500 heading into 2019. On December 24, 2018, the S&P 500 was amid its worst December since 1931 before rallying over 6%. The S&P 500 still ended the month with its biggest loss since the Great Depression, but the Santa Claus Rally helped pare some of those losses and then act as a springboard as January produced gains of 7.69%.
It is worth noting that the final week of the calendar year normally trades on lower volume than any other week.
That doesn’t change the fact that the last four trading sessions of a year and first two sessions of the next year produce, on average, larger gains. While past results are not indicative of future returns, history can tell us something, and the Santa Claus Rally has happened 67% of the time over the past 27 years. It’ll be worth watching again as we continue on the road to economic recovery.
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