The Santa Rally refers to a seasonal stock market trend where equities historically see stronger gains during the final stretch of December.
This phenomenon, often fueled by holiday cheer, year-end portfolio rebalancing, and investor optimism, has been a recurring pattern for decades.
But what makes December stand out, and which stocks have historically outperformed during this period?
Let's dig into the numbers.
December: A Seasonal Sweet Spot For Stocks
After a strong rally in November, with the S&P 500 – as tracked by the SPDR S&P 500 ETF Trust SPY – rallying 6%, “momentum could continue for stocks as historically it has been a good month for stock market seasonals,” said George Smith, portfolio strategist at LPL Financials.
Since 1950, December ranks as the second-best month for the S&P 500, delivering an average return of 1.6%. Only November performs better, with a historical average of 1.8%.
Smith also highlighted that the second half of December has typically delivered the lion's share of these gains, generating the so-called “Santa Rally” effect.
Historically, stocks tend to stall or even decline slightly during the first half of the month before momentum builds around mid-December. Data suggests that the upward trajectory starts gaining steam near the 11th trading day of the month and accelerates as Christmas approaches.
Top 10 S&P 500 Stocks With Strong Christmas Seasonality
For investors looking to capitalize on the Santa Rally, certain stocks have a history of delivering outsized gains in the back half of December.
Looking back at the last 20 years of data, here are the top 10 S&P 500 stocks that have historically shown the strongest average returns between Dec. 12 and Dec. 31:
| Rank | Stock | Average Return | Median Return | Max Profit | Max Loss | Win Ratio | Sharpe Ratio |
|---|---|---|---|---|---|---|---|
| 1 | Illumina, Inc. ILM | +4.94% | +5.17% | +19.39% | -10.98% | 75% | 4.27 |
| 2 | Invesco Ltd. IVZ | +4.34% | +3.04% | +23.10% | -5.10% | 80% | 3.72 |
| 3 | Valero Energy Corporation VLO | +3.78% | +4.37% | +12.89% | -8.52% | 80% | 3.70 |
| 4 | Western Digital Corporation WDC | +3.73% | +3.84% | +24.23% | -13.26% | 70% | 2.75 |
| 5 | Mohawk Industries, Inc. MHK | +3.47% | +2.19% | +20.26% | -4.35% | 70% | 3.18 |
| 6 | Freeport-McMoRan Inc. FCX | +3.34% | +4.60% | +25.84% | -15.06% | 75% | 2.03 |
| 7 | BlackRock, Inc. BLK | +3.32% | +3.62% | +11.64% | -1.69% | 80% | 3.49 |
| 8 | Global Payments Inc. GPN | +3.30% | +3.35% | +12.38% | -8.28% | 80% | 3.44 |
| 9 | CBRE Group, Inc. CBRE | +3.20% | +3.24% | +13.27% | -7.11% | 75% | 2.22 |
| 10 | Royal Caribbean Cruises Ltd. RCL | +3.14% | +1.80% | +36.95% | -14.54% | 55% | 2.36 |
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