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Santa Claus might not come to Wall Street this year

Historically seen as a profitable month for investors, December might just catch many by surprise with some analysts growing increasingly wary of an overvalued market.

Since 1929, the return on the S&P 500 for December has been about 1.5 percent on average, according to Reuters. For the Dow, the average return has been about 1.3 percent on average from 1910 to 2010.

This frequent year-end surge has come to be known as the "Santa Claus rally." However, Sean Corrigan, chief investment strategist at Diaspason Commodities told CNBC that history might be leading investors astray.

(Read More: Like 2013 gains?Watch out for 2014)

"History tells you what the average was in the past. It doesn't give you any predictive powers about where the distribution is going to be in the future," he told CNBC Monday.

This year has been kind to equity investors with the S&P rallying 26.5 percent and the Dow 22.5 percent. The S&P 500 recorded its first close above 1,800 on Friday and the Dow posted its longest weekly winning streak in nearly three years. With a price-to-earnings ratio of 18.25 for the S&P 500, many are now suggesting U.S equities are overvalued and Corrigan believes it'll be nonsensical for investors to chase them higher.

Michael O'Sullivan, a chief investment officer at Credit Suisse is bullish for stock markets over the long term. He argued to CNBC that "we're in a boom, we're not in a bubble." Nonetheless, he has doubts over the short term too.

"It just smells wrong in the short term to me," he told CNBC Monday.

(Read More: Expect a lackluster 2014 for global equities: HSBC)

"We recently had a much more cautious view on equities and we would not be telling people to go and aggressively buy equities right now. I think in the last couple of weeks there's been a lower quality type of rally in terms of the indicators."

Jeff Kilburg from KKM Financial highlighted to CNBC last week that stock-watchers are increasingly fearful that Treasury yields will spike in the belief that interest rates and stocks can't both go up at the same time. With the U.S. Federal Reserve looking likely to "taper" its asset purchases, he believes that a tick higher in yields in December could push markets lower.

"I think there's fatigue," he said. "If the 10-year (Treasury yield) goes back towards 3 percent you will see the equity market cool off."

(Read More: S&P 500 is going nowhere, except down: SocGen)

In contrast, Ishaq Siddiqi, a market strategist at ETX Capital said that the Federal Reserve deciding to keep pace with its $85 billion-a-month bond buying program at its next policy meeting would actually mean risk appetite growing in the final weeks of the year.

"I reckon we are in for a 'Santa rally'," he told CNBC via email. "At the same time, the strong run of U.S. economic data is likely to continue, which will unnerve market participants, so I reckon we will see bouts of volatility in the markets with investors hyper-sensitive to economic data releases."

Siddiqi sees the U.K.'s FTSE 100 finishing the year at 6,850 from current levels of 6,693 and the DAX at 9,500 from 9,308.

By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81

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