December 2025 Almanac & Vital Stats: Small Caps Lead By: Jeffrey A. Hirsch & Christopher Mistal | November 13, 2025 | Email | Print

[Publishing schedule changes: Due to Thanksgiving Day holiday, we are sending December 2025 Vital Stats email Issue today. Next Thursday, November 20, 2025, December’s Outlook email Issue will be sent, and we will host the next member’s only webinar on Tuesday, November 25, 2025. The invite to the webinar will be sent out with the December Outlook Issue next Thursday.]

 

December is the number three Dow Jones Industrials and S&P 500 month since 1950, averaging gains of 1.5% and 1.4% respectively. It’s also the third-best NASDAQ (since 1971) month. It is the second-best month for Russell 2000 (since 1979). The market rarely falls precipitously in December. In 2018, DJIA suffered its worst December performance since 1931 and its fourth worst December going all the way back to 1901. When December is down it is usually a turning point in the market—near a top or bottom. If the market has experienced fantastic gains leading up to December, stocks have consolidated in the first half of the month. A repeat of 2018 does not seem likely this year as economic growth (GDP) is accelerating, and the Fed is in an easing cycle (lowering interest rates).

 

 

In the last eighteen post-election years, December’s ranking changes modestly to #5 for DJIA and #6 S&P 500, NASDAQ eases to seventh place. Small caps, measured by the Russell 2000, tend to have a field day in post-election-year Decembers. Since 1981, Russell 2000 has lost ground three times in eleven post-election-year Decembers. The average small cap gain in all eleven years is a solid 2.2%. Russell 2000’s three post-election year December losses were –0.56% in 2017, – 0.60% in 2005, and –1.96% in 1981.

 

 

Trading in December has historically been holiday-inspired and fueled by a buying bias throughout the month. However, the first part of the month has been choppy as tax-loss selling and yearend portfolio restructuring begins. December’s first trading day leans bearish for DJIA, S&P 500, NASDAQ and Russell 1000 over the last 21 years and has been outright bearish for Russell 2000. A modest rally through the around the sixth trading day has also fizzled going into mid-month. It is around this point that holiday cheer tends to kick in (and tax-loss selling pressure fades) propelling the indexes higher with a pause near month-end. Post-election year Decembers follow a similar path, but with noticeably better historical gains in second half of the month by Russell 2000.

 

Small caps tend to start to outperform larger caps near the middle of the month (early January Effect) and our “Free Lunch” strategy is served from the offerings of stocks making new 52-week lows on Triple-Witching Friday. An email Issue will be sent prior to the market’s open on December 22 containing “Free Lunch” stock selections. The “Santa Claus Rally” begins on the open on December 24 and lasts until the second trading day of 2026. Average S&P 500 gains over this seven trading-day period since 1969 are a respectable 1.2%.

 

This is our first indicator for the market in the New Year. Years when the Santa Claus Rally (SCR) has failed to materialize are often flat or down. Seven of the last eight times our SCR (the last five trading days of the year and the first two trading days of the New Year) has not occurred were followed by three flat years (1994, 2004 and 2015), two nasty bear markets (2000 and 2008), a mild bear that ended in February 2016 and a near bear in 2025 triggered by tariffs. Santa’s no show in 2024 was likely due to temporary inflation and interest rate concerns that quickly faded as the AI-fueled rally resumed. As Yale Hirsch’s now famous line states, “If Santa Claus should fail to call, bears may come to Broad and Wall.”

 

December Triple Witching Week is more favorable to the S&P 500 with Monday up sixteen of the last twenty-five years while Triple-Witching Friday is up twenty-seven of the last forty-three years with an average 0.20% gain. The entire week has logged S&P 500 gains twenty-nine times in the last forty-one years. The week after December Triple Witching is the best of all weeks after Triple Witching for DJIA and is the only one with a clearly bullish bias, advancing in thirty-three of the last forty-three years. S&P 500 also shines bright with a string of bullish days that runs from December 19 to 26.

 

Trading the day before and the day after Christmas is generally bullish across the board with the greatest gains coming from the day before (NASDAQ up fourteen of the last eighteen). On the last trading day of the year, NASDAQ has been down in nineteen of the last twenty-five years after having been up twenty-nine years in a row from 1971 to 1999. DJIA, S&P 500, and Russell 1000 have also been struggling recently and have exhibited a bearish bias over the last twenty-one years. Russell 2000’s record very closely resembles NASDAQ, gains every year from 1979 to 1999 and only seven advances since.