"Santa Claus rally" arrives late, analysts say there's still a chance after the holiday!

The so-called "Santa Claus rally" may arrive later this year than in previous years, but better late than never. A group of strategists from Ned Davis Research (NDR) pointed out that the performance of the US stock market has been lackluster before the official start of the "Santa Claus rally," causing some investors to feel uneasy. However, historical data shows that even if the rally does not start as expected, investors still have the opportunity to see a compensatory strong uptrend. According to the analysis by the NDR team, when the stock market performs poorly in the days leading up to Christmas, there tends to be a significant rebound in the five trading days after the holiday. NDR analyst London Stockton mentioned in a report on Monday, "Although there are only two days left until Christmas and the S&P 500 has fallen 2%, historically, this situation has actually resulted in an average return of 2% in the five days after the holiday. In 17 similar situations, the post-holiday market performance has mostly been strong." According to FactSet data, the S&P 500 index has dropped nearly 2% since December 17. This decline occurred mainly after Federal Reserve Chairman Powell's press conference on December 18. Despite the Fed's announcement of a rate cut, Powell hinted at a slowing pace of rate cuts in 2025 during the press conference, which dampened investor sentiment. Normally, the "Santa Claus rally" includes the last five trading days of the year and the first two trading days of the new year. This year, this period should start on Tuesday (December 26) and continue until January 3, 2025. According to data from Dow Jones Market Data, the average increase of the S&P 500 index during this period since 1950 is 1.3%, with a probability of increase reaching 77%. In addition to seasonal factors, NDR also pointed out other reasons that may prompt a market rebound before the new year. Firstly, based on various indicators maintained by NDR, the US market is currently in a short-term oversold range. Secondly, due to the weak performance of the stock market since early December, investor sentiment indicators show a significant decrease in optimism. This may mean that more funds are waiting on the sidelines, and once the market improves, these funds may quickly flow in and boost the stock market. Even if the year-end rally fails to materialize in the end, investors have still seen significant gains in 2024. As of Monday noon, the S&P 500 index has risen by over 24% since the beginning of the year.