Santa Still Has Time to Drive Stock ETFs Higher

Santa didn’t come to Wall Street this year, but investors can’t complain too much. The Santa Claus rally—a phenomenon in which U.S. stocks tend to rise around Christmas— hasn’t materialized in 2024 (so far), but the market is still on track to end the year with big gains.

And who knows? Maybe ol' St. Nick will show up at the last minute. 

Technically, there’s still time for the big man to make an appearance. The Santa Claus rally encompasses the period that includes the last five trading days of the current year and the first two trading days of the subsequent year.

That means our jolly bearded friend has until Jan. 3 to potentially drive stocks higher. According to the Stock Trader’s Almanac, the S&P 500 has historically risen an average of 1.3% during the Santa Claus rally.

The SPDR S&P 500 ETF Trust (SPY) was roughly flat between Dec. 24 and Dec. 27, but finished the session on Monday, Dec. 30 down by 1.1%.

The Santa Claus Stock ETF Rally Could Still Take Shape

Santa has the rest of this week to right the sleigh. The stock market is closed on New Year’s Day, but resumes normal trading hours Thursday, Jan. 2. 

But regardless of whether stocks rebound later this week or not, the impact on 2024’s returns won’t be all that significant.

Even after Monday’s decline, SPY was up almost 26% on a year-to-date basis, an incredibly strong return on top of last year’s 26% gain.

As I wrote last week, there’s only been three other instances where the S&P 500 jumped by more than 25% in back-to-back years. In two of those cases, the market continued to rally the next year, while in the other, the market fell substantially.

We’ll see what 2025 has in store for investors. Happy New Year!