Santa Claus Rally

In the last several days, I have seen comments on CNBC about a Santa Claus rally. CNBC observed that, on the average, the stock market rose after Christmas and the first few days of January. To test this, I downloaded daily S&P Index data since 1950. I analyzed what happened over the next eight trading days. I computed the average change in the close from the last trading day before Christmas to the close eight days later. Out of curiosity, I also looked at the results based on which day of the week Christmas fell. Following are the results.

Next 8	All	Up	Down	Up %	Ave	Best	Worst
All	64	48	16	75%	1.3%	7.7%	-5.7%
Sun	9	7	2	78%	0.5%	3.4%	-2.1%
Mon	9	7	2	78%	1.7%	4.0%	-0.4%
Tue	10	6	4	60%	0.5%	6.5%	-5.7%
Wed	9	6	3	67%	2.1%	6.3%	-2.4%
Thu	9	9	0	100%	3.0%	7.7%	1.0%
Fri	9	7	2	78%	1.1%	3.8%	-2.7%
Sat	9	6	3	67%	0.2%	3.0%	-4.0%

Out of 64 total years, the market went up in 75% of them. The total average change was +1.3%.

Interestingly, Christmas fell on a Thursday nine times and the S&P 500 increased over the next eight days every time with an average increase of 3.0%. The increases ranged from 1.0% to 7.7%. With only nine samples, one should ask if that’s enough to invest in. It was for me; I bought some SPY ETFs.

Next we’ll have to look what happened in the following Januarys.