Infographic: Do You Believe in the Santa Claus Rally?
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Do You Believe in the Santa Claus Rally?

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Do You Believe in the Santa Claus Rally?

Do You Believe in the Santa Claus Rally?

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Just like children eagerly anticipate the arrival of the big man in the red suit, stock traders have a similar holiday tradition of importance.

According to the 2019 Stock Trader’s Almanac, there’s an average 1.3% market rally in stocks that occurs every year during the holidays. Dubbed the “Santa Claus Rally”, it’s happened about 75% of the time since 1969.

And this year in particular, after one of the worst months for the market in recent memory, it’s no secret that investors have their hopes up for a sizable present under the tree.

Recent Rally History

Although the Santa Claus Rally has historical significance going back many decades, over the more recent period it’s been much more elusive.

Here is the data over the last five years.

We’re using the time period as defined by the Trader’s Almanac (last five trading days of December, and first two in New Year), and S&P 500 Index prices.

YearDay 1*Day 7**Change
2013-141828.021831.370.2%
2014-152083.252020.58-3.0%
2015-162063.522016.71-2.3%
2016-172260.252270.750.5%
2017-182684.222713.061.1%

Data for S&P 500, *Opening price **Closing price

As you can see, Santa provided a nice gift to traders (1.1%) last year – but in two of the previous holidays stretches, Wall Street must have been far naughtier.

During the 2014-15 and 2015-16 seasons, the S&P 500 saw -2.7% returns, a proverbial lump of coal in portfolio stockings.

Do You Believe?

No one is really sure why the Santa Claus Rally happens, but various theories have been proposed.

Some say investors are buying in anticipation of the January effect, or that it happens as a result of tax reasons. Others say it’s a period of time where institutional investors are home with their families, and bullish retail investors take control of the market.

Either way, it seems after a brutal December – which included the worst week for the Dow (-7%) since the financial crisis – the market could benefit from the Santa bump this year.

At time of publication (Dec. 28th, 4pm ET), the S&P 500 is up 5.7% from Christmas Eve lows – though there are still a few days left in the typical rally time window to see if the gains hold.

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Markets

The Top Google Searches Related to Investing in 2022

What was on investors’ minds in 2022? Discover the top Google searches and how the dominant trends played out in portfolios.

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Trend lines showing when the top Google searches related to investing reached peak popularity over the course of 2022.
The following content is sponsored by New York Life Investments

The Top Google Searches Related to Investing in 2022

It was a turbulent year for the markets in 2022, with geopolitical conflict, rising prices, and the labor market playing key roles. Which stories captured investors’ attention the most? 

This infographic from New York Life Investments outlines the top Google searches related to investing in 2022, and offers a closer look at some of the trends.

Top Google Searches: Year in Review

We picked some of the top economic and investing stories that saw peak search interest in the U.S. each month, according to Google Trends.

Month of Peak InterestSearch Term
JanuaryGreat Resignation
FebruaryRussian Stock Market
MarchOil Price
April Housing Bubble
MayValue Investing
JuneBitcoin
JulyRecession
AugustInflation
SeptemberUS Dollar
OctoberOPEC
NovemberLayoffs
DecemberInterest Rate Forecast

Data based on exact searches in the U.S. from December 26, 2021 to December 18, 2022.

Let’s look at each quarter in more detail, to see how these top Google searches were related to activity in the economy and investors’ portfolios.

Q1 2022

The start of the year was marked by U.S. workers quitting their jobs in record numbers, and the effects of the Russia-Ukraine war. For instance, the price of crude oil skyrocketed after the war caused supply uncertainties. Early March’s peak of $125 per barrel was a 13-year high.

DateClosing Price of WTI Crude Oil
(USD/Barrel)
January 2, 2022$76
March 3, 2022$125
December 29, 2022$80

While crude oil lost nearly all its gains by year-end, the energy sector in general performed well. In fact, the S&P 500 Energy Index gained 57% over the year compared to the S&P 500’s 19% loss.

Q2 2022

The second quarter of 2022 saw abnormal house price growth, renewed interest in value investing, and a bitcoin crash. In particular, value investing performed much better than growth investing over the course of the year.

IndexPrice Return in 2022
S&P 500 Value Index-7.4%
S&P 500 Growth Index-30.1%

Value stocks have typically outperformed during periods of rising rates, and 2022 was no exception.

Q3 2022

The third quarter was defined by worries about a recession and inflation, along with interest in the rising U.S. dollar. In fact, the U.S. dollar gained against nearly every major currency.

Currency USD Appreciation Against Currency
(Dec 31 2020-Sep 30 2022)
Japanese Yen40.1%
Chinese Yuan9.2%
Euro25.1%
Canadian Dollar7.2%
British Pound22.0%
Australian Dollar18.1%

Higher interest rates made the U.S. dollar more attractive to investors, since it meant they would get a higher return on their fixed income investments.

Q4 2022

The end of the year was dominated by OPEC cutting oil production, high layoffs in the tech sector, and curiosity about the future of interest rates. The Federal Reserve’s December 2022 economic projections offer clues about the trajectory of the policy rate.

 202320242025Longer Run
Minimum Projection4.9%3.1%2.4%2.3%
Median Projection5.1%4.1%3.1%2.5%
Maximum Projection5.6%5.6%5.6%3.3%

The Federal Reserve expects interest rates to peak in 2023, with rates to remain elevated above pre-pandemic levels for the foreseeable future.

The Top Google Searches to Come

After a year of volatility across asset classes, economic uncertainty remains. Which themes will become investors’ top Google searches in 2023?

Find out how New York Life Investments can help you make sense of market trends.

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