Wall Street had another tumultuous year in 2024, but the stock market ended with a whimper, not a bang.
With 2024 in the books, S&P 500 (SNPINDEX: ^GSPC) gained 23.3%, the second consecutive year with a gain of at least 20%. That hasn’t happened since the 1990s, and the index managed to turn in such a strong performance despite weakness in the second half of December, which began after the Federal Reserve cut its forecast for a rate cut in 2025.
That year-end decline may have surprised some investors in such a strong year as 2024. In fact, Yale Hirsch, founder of the Stock Trader’s Almanac, previously identified a tendency for the stock market to rise in the final days of the year, and he called it “Santa’s gathering.” Although the term is often used loosely to apply to year-end performance, Hirsch gave it strict limits, defining the relevant period as the last five trading days of the first year and the first two trading days of the following year. Hirsch first noticed the pattern in 1972, and also found a correlation between the market’s performance during the Santa gathering and its performance the following year.
The most recent Santa period ended on January 3, with stocks down 0.5%. Here’s what it could mean for the market in 2025.
From 1993 to 2023, the Santa Clause correctly predicted the direction of the S&P 500 the following year 23 out of 31 times. Hirsch was confident enough in the indicator’s predictive power that he was known to declare, “If Santa doesn’t call, the bears might come to Broad and Wall,” referring to the intersection where the New York Stock Exchange is located.
The indicator also gained enough popularity to be mentioned frequently on Wall Street and in the financial media at the end of the year, although there is no clear reason for the correlation.
This could be because retail investors are more active at the end of the year, or the activity of managers at the year-end rebalance could foreshadow the next year’s results. It may also reflect the general mood of retail investors or the size of year-end bonuses, some of which are likely to be invested in the stock market.
With a 74% hit rate over three decades, gathering Santa is not a hard and fast rule. Just a year ago, the stock market was down 0.9% during the relevant period, and as we now know, the S&P 500 ended 2024 up 23%. Santa’s indicator was wrong.
