Investors are once again looking forward to the annual Santa Claus rally, a term that describes the positive momentum often seen in the stock market during the final five trading days of the year and the initial two days of January. This year, the Santa trading window kicks off on December 24.
The market has shown resilience throughout the year, especially since reaching lows in April, with the S&P 500 climbing to several record highs. Despite December’s inherent volatility, investment professionals remain optimistic about a potential holiday rally as the year draws to a close and a new one begins. Louis Navellier, chairman and CIO of Navellier & Associates, believes current market conditions have set the stage for the rally. He mentioned that concerns regarding artificial intelligence (AI) trades are subsiding, and many sectors appear robust. Navellier noted a particularly strong performance from small-cap stocks, with the Russell 2000 index demonstrating the greatest gains, indicating that investors might be more inclined to embrace risk as 2026 approaches.
“The trend is our friend; 2026 looks to have a strong start, and a potential Santa Claus rally is back on the table,” Navellier stated recently. Mark Hackett, chief market strategist at Nationwide, echoed this sentiment, expressing optimism about the holiday rally. He cautioned, however, that while the year-end momentum may be strong, early 2026 could see a cooling off of market conditions. “The last two weeks of the year have been the best on the calendar since 1950, as investors strategically position themselves for year-end,” he explained. According to Hackett, historical data shows that the market has been positive 80% of the time during this period, with an average gain of 1.6% since 1928. He also pointed out that widespread discussion of the rally might contribute to a self-fulfilling prophesy.
Amidst the prevailing optimism, other finance professionals are urging a measured approach as the year comes to a close. Clark Bellin, president and CIO of Bellwether Wealth, suggested that while some volatility may persist, a Santa Claus rally is indeed likely. “The market may feel turbulent now, but stocks have mostly remained within a narrow trading range this month,” he noted, adding that year-end seasonal strength could be the catalyst needed to break this trend. Bellin anticipates further growth from the tech sector in 2026.
Similarly, Paul Stanley, CIO of Granite Bay Wealth Management, foresees a Santa Claus rally unfolding in the closing days of 2025. He attributed this optimism to a combination of low trading volumes and a lack of negative developments. “Valuations in tech are high, but some major players have underperformed the S&P 500 this year,” he observed. This discrepancy suggests that there is still potential for growth in the sector, offering hope to those looking for a robust finish to the year.
As the countdown to the end of 2025 begins, the financial community remains watchful, hoping that holiday cheer will translate into market gains during this traditionally uplifting time of year.
