Santa Claus Rally Real

Investing.com — The US equities "Santa Claus rally is real,” according to Bank of America strategist Stephen Suttmeier.

The latter half of December often highlights the month’s characteristic seasonality, especially between Christmas and New Year’s Day. This Santa Claus rally is tracked through the S&P 500 (SPX) performance over the last five trading sessions of December and the first two of January.

"This period is up 79% of the time with an average return of 1.64% (1.43% median) going back to 1928 into 1929." Similarly, during the shift from a presidential election year to the first year of a new cycle, the SPX historically performs well, increasing in value 79% of the time with an average gain of 1.85%.

Historical data since 1928 shows December as the strongest month for the SPX, with the index rising 74% of the time and posting an average return of 1.32%. In presidential election years, this trend is more significant, featuring gains 83% of the time with an average return of 1.51%.

However, the month’s seasonality skews towards the latter half, as the last ten trading days typically outperform the first ten.

In the first ten sessions of December, the SPX registers a modest average gain of 0.05% and rises 59% of the time. In contrast, the final ten sessions show stronger performance, with the SPX increasing 72% of the time and an average return of 1.17%.

Strength during late December often continues into early January, with the SPX rising 63% of the time and achieving an average return of 0.72% in the first ten trading sessions of the new year.

"December in presidential election years is more balanced compared to all years,” Suttmeier notes. “The month is stronger during the first ten sessions and slightly weaker in the last ten days."

Meanwhile, January’s seasonality in the first year of the presidential cycle typically lags behind its historical average, suggesting a less robust start to the new year for the SPX.