Santa Fails to Call, But All Isn’t Lost, Trifecta 2 of 3 Okay By: Jeffrey A. Hirsch & Christopher Mistal | January 03, 2025 | Email | Print

Despite impressive market gains today, Santa was a no-show for the second year in a row. From its close of 5974.07 on December 23, 2024, through today’s close of 5942.47, S&P 500 fell 0.5%. But all hope for 2025 is not lost yet.

 

Defined in the Stock Trader’s Almanac, the Santa Claus Rally (SCR) is the propensity for the S&P 500 to rally the last five trading days of December and the first two of January with an average gain of 1.3% since 1950. This indicator was discovered and first published by Yale Hirsch in the 1973 edition of the Almanac.

 

The lack of a rally can be a preliminary indicator of tough times to come. This was certainly the case in 2008 and 2000. A 4.0% decline in 2000 foreshadowed the bursting of the tech bubble and a 2.5% loss in 2008 preceded the second worst bear market in history. Down SCRs were followed by flat years in 1994, 2005 and 2015, and a mild bear that ended in February 2016. Last year, in 2024, New Years jitters did not last throughout January and S&P 500 went on to log a second straight yearly gain in excess of 20%. Of the 16 down SCRs since 1950, 11 years have been up and 5 down, but the average gain is a tepid 6.1%. As Yale Hirsch’s now famous line states, “If Santa Claus should fail to call, bears may come to Broad and Wall.”

 

 

With the Santa Claus Rally a no show we will be watching for a positive First Five Days (FFD) and January Barometer (JB), the second and third legs of our January Indicator Trifecta. If these seasonal indicators are negative and the market does not rally as it normally does during this time, we may shift to a less bullish posture – if not outright bearish. With two more January indicators remaining, we will reserve final judgement until the end of January when the JB result is officially known. From our January 2 email Issue, as long as the JB is positive the prospects for 2025 remain reasonably good.

 

 

 

 

However, should the FFD and/or JB also be negative, it will weigh heavily on the outlook for full-year 2025.