🎉 Year-End Rally: Joyful Markets Ahead! 🚀

Discover how Thanksgiving momentum, the Santa Claus Rally, and the January Effect shape year-end markets—and uncover opportunities to boost your portfolio!

Author

Frank Angus
November 28, 2024

In partnership with

Ah, the holidays.

A time for cheer, cozy sweaters, and... market speculation?

Every year, Wall Street dons its festive hat, and investors eagerly await the “Year-End Rally.”

It’s a season packed with market traditions like Thanksgiving momentum, the Santa Claus Rally, and the January Effect.

But let’s be real—markets aren’t just powered by holiday spirit.

There’s a lot going on beneath the tinsel.

Let’s unwrap the trends and figure out if this year’s rally might gift us gains or give us a lump of coal.

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From Turkey to Trading: Thanksgiving Kicks Things Off

Thanksgiving isn’t just for feasting—it’s often the starting whistle for year-end market activity.

SPY from StockCharts

Historically, the S&P 500 averages a 1.2% gain from the Tuesday before Thanksgiving through November’s end.

In 2008, it even soared 7.4% as the market rebounded from the financial crisis.

What fuels this?

Post-Thanksgiving optimism, rising trading volumes, and “window dressing” by institutional investors eager to polish their portfolios.

Sectors like Consumer Discretionary and Technology typically benefit the most, making ETFs like SPY and QQQ solid options for exposure.

This period isn’t a guarantee, but it’s often a promising start.

🎅 The Santa Claus Rally: A Jolly Boost or Just a Myth?

The Santa Claus Rally refers to the last five trading days of December and the first two of January.

QQQ from StockCharts

And it’s no myth!

Since 1950, the S&P 500 has delivered positive returns 79% of the time during this period, with an average gain of 1.3%.

Even in turbulent years like 2020, it provided a 1% boost—proof that a little seasonal magic can go a long way.

Small-cap stocks, like those in the IWM ETF, often outperform during this time.

But lately, this trend has been less reliable, with larger caps sometimes stealing the show.

Riding Into January: The January Effect

January isn’t just about New Year’s resolutions—it’s when small-cap stocks often shine.

IWM from StockCharts

Historically, these stocks outperform larger ones about 53% of the time.

For example, between 2014 and 2023, the IWM ETF averaged a January gain of 1.1%, while the IVV (large-cap ETF) averaged 0.7%.

But beware—the January Effect isn’t a sure thing.

In 2023, IWM actually dropped 0.6%, while IVV climbed 6.2%.

Tax-loss harvesting, year-end bonuses, and institutional rebalancing can fuel this trend, but economic conditions and sentiment ultimately hold the reins.

🎯 Eyes on 2024/2025: What’s Next?

IVV from StockCharts

As we approach the holidays, several factors could shape the market’s direction:

Inflation is still high, but moderating—how much relief will we see?

Geopolitical tensions remain a wildcard.

Energy prices are a key indicator amid supply chain issues.

If these challenges ease, we might see a rally that rivals historical averages.

But if they escalate, the market could be less jolly and more jittery.

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Savvy Investors Know Where to Get Their News—Do You?

Here’s the truth: there is no magic formula when it comes to building wealth.

Much of the mainstream financial media is designed to drive traffic, not good decision-making. Whether it’s disingenuous headlines or relentless scare tactics used to generate clicks, modern business news was not built to serve individual investors.

Luckily, we have The Daily Upside. Created by Wall Street insiders and bankers, this fresh, insightful newsletter delivers valuable insights that go beyond the headlines.

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🛡️ A Cautious Yet Confident Approach

Let’s be honest—no one has a crystal ball.

While historical patterns like the Year-End Rally are intriguing, they’re not guarantees.

The best strategy?

Diversify, manage your risks, and balance optimism with realism.

Use seasonal trends as a guide—not a gospel.

ETFs like SPY, QQQ, and IWM can be great tools, but always do your homework.

đź’ˇ Wrapping It Up

The year-end rally isn’t just market folklore—it’s a fascinating mix of history, psychology, and opportunity.

Will you ride the wave or watch from the sidelines?

The choice is yours.

🎉 Let's Hear From You!

What’s your take on this year’s holiday market?

Are you optimistic, cautious, or somewhere in between?

Drop your thoughts below!

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