Will There Be a “Santa Claus Rally” in 2025?

Every December, traders ask whether we will see a “Santa Claus Rally” in the stock market In this article, I define exactly a Santa Claus Rally, then test almost a century of S&P 500 Index performance to check for both historic and recent outperformance. December outperformance has disappeared over the past 20 years, but bullish momentum still suggests a rising stock market in December 2025, even if Santa doesn’t show up.

What is a “Santa Claus Rally"?

The Santa Claus Rally is generally defined as outperformance by the broad US stock market over the trading days in December after 25^th December (Christmas Day) and over the first two trading days of January.

The performance of the broad American stock market is typically measured by the S&P 500 Index, which is the widely used benchmark. Although the S&P 500 Index was created relatively recently, it can be hypothetically calculated back many decades.

My personal definition of the Santa Claus Rally period is the calendar month of December, partly because it is much easier to calculate, and partly because if there is a statistically significant Santa Claus rally, it is extremely likely to be reflected in the monthly data by showing seasonal outperformance in the month of December.

Santa Claus Rally Data

To examine whether the Santa Claus Rally exists, and whether it has continued to manifest in recent years, I calculated general monthly performance of the S&P 500 Index since 1927, and the performance just in Decembers. I also did the same for the past 20 years, to determine whether, as many analysts say, the effect has recently disappeared. The results are shown in the table below:

A few conclusions can be drawn from this data:

1. There was a pronounced December average outperformance between 1927 and, at the latest, 2005.
2. There were a higher proportion of winning Decembers than other calendar months over the same period described in 1. above.
3. Over the past 20 years, any December outperformance has disappeared, both in terms of average performance and probability of a winning month.
4. The Santa Claud Rally used to be statistically significant but has disappeared.

Could a Santa Claus Rally Happen This Year?

Even if we discount December seasonality – and there seems to be a good reason to do that based on the data – could there be another reason why we might expect a strong stock market performance for December 2025?

Yes, there are two good reasons why we can.

1. The US stock market in particular, and the global stock market in general, are still in bull markets. The S&P 500 Index, at the time of writing, is only about 100 points off its all-time high, which was made just a few weeks ago.
2. The US stock market has a very strong track record of rising and is likely to rise in any given month. Note that the last 20 Decembers have produced an average return of 0.89%, with 70% of these months being winning months.
3. The momentum effect has continued to be shown in S&P 500 data over the past 20 years, unlike seasonal outperformance for the month of December. We can observe this by examining performance data over the last 20 years:

• When the S&P 500 Index has performed positively over the last 6 months, it produces more winning months the following month (72.13% vs 69.29%), and a higher average monthly return the following month (1.07% vs. 0.92%).
• When the S&P 500 Index has risen by at least 5% over the last 6 months, it produces even more winning months the following month (74.15% vs 69.29%), and a higher average monthly return the following month (1.11% vs. 0.92%).

My Take

Just because there isn’t going to be a Santa Claus Rally doesn’t mean the stock market isn’t going to rise over the last month of 2025. In fact, it is more likely than not to do so, as we have seen bullish momentum over the past several months. However, the US stock market is dominated by heavily overvalued tech companies, so it would not be a big surprise to me if we see a decline over December 2025.