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Will Santa Bring a Lift to the Markets?

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Tomorrow is Christmas Eve and historically has been the start of annual Santa Claus rallies. The rallies typically run from the day before Christmas and continue through the first two trading days of the New Year. Here's a look at what happens when Santa decides if we have been naughty or nice.

On average, the Dow , S&P 500 , and Nasdaq , have gained 1.9%, 1.7%, and 2.3% respectively during the rally and have been up ~75% or more of the time.

  • Dow (since first Santa Claus Rally: Dec 1896 - Jan 1897)
    • Avg gain of 1.9%, up 77% of the time
    • Biggest rally: 11.6% from Dec 1917 to Jan 1918
    • Avg gain when up, 2.8%
    • Avg drop when down, -1.3%
  • S&P (since first Santa Claus Rally: Dec 1928 - Jan 1929)
    • Avg gain of 1.7%, up 74% of the time
    • Biggest rally: 7.8% from Dec 1941 to Jan 1942
    • Avg gain when up, 2.8%
    • Avg drop when down, -1.4%
  • Nasdaq (since first Santa Claus Rally: Dec 1971 - Jan 1972)
    • Avg gain of 2.3%, up 84% of the time
    • Biggest rally: 11.8% from Dec 2000 to Jan 2001
    • Avg gain when up, 3.1%
    • Avg drop when down, -2.1%

According to the Stock Trader's Almanac, "if Santa Claus should fail to call, bears may come to Broad and Wall." While the odds of a rally are nearly 3:1, a drop often precedes a bear market, the Almanac explains.

Let's hope everyone's been nice this year. Happy Holidays!

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