Despite historical data warning that a missing “Santa Claus Rally” can signal trouble, Chief Market Strategist of Carson Research, Ryan Detrick, is urging investors to stay optimistic as the S&P 500 hovers just shy of hitting a new all-time high.
Resilience Near All-Time Highs
With the official holiday trading period set to begin Wednesday, Detrick notes that while failed rallies are a concern, the market’s recent resilience suggests “Santa” hasn’t abandoned Wall Street yet.
In a post on X on Monday, Detrick highlighted the market’s swift recovery from recent volatility. He noted that the S&P 500 index was trading close to its all-time highs, contrasting this with the sentiment just three trading days prior, when the index was down 2.6%, and fears were mounting that “the end was near.”
Detrick’s commentary underscores a psychological battle for investors: the clash between fearful sentiment during dips and the underlying trend of recovery. His stance remains firm despite the short-term noise, declaring, “Don’t stop believing in Santa will always be my take.”
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The ‘Worry’ Signal
While Detrick remains bullish, he acknowledges the validity of seasonal indicators. The “Santa Claus Rally”—defined strictly as the final five trading days of the year and the first two of the New Year—is historically a strong predictor of near-term performance.
According to data shared by Detrick, when this specific seven-day period yields negative returns, it often foreshadows a difficult first quarter. He pointed to the previous year (2024) as a prime example: the S&P 500 saw a -0.5% return during the holiday window, which was followed by a 4.6% drop in the first quarter of 2025.
“It is when Santa doesn’t show up that we should be worried,” Detrick admitted, validating the correlation between a red December finish and a rocky start to the next year.
However, with the market currently up nearly 17% year-to-date despite that rough start, the strategist suggests that while indicators are useful, they shouldn’t derail long-term belief in the market’s potential.
S&P 500, Nasdaq, Dow Jones Gain Year-To-Date
After a series of federal and economic headwinds, the stock market remained resilient in 2025, with all three major U.S. benchmark indices advancing over the course of the year.
The S&P 500 was 17.21% higher, whereas the Nasdaq Composite and Dow Jones gained 21.51% and 14.08%, respectively, on a year-to-date basis.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed higher on Monday. The SPY was up 0.62% at $684.83, while the QQQ advanced 0.47% to $619.16, according to Benzinga Pro data.
The futures of Dow Jones, S&P 500, and Nasdaq 100 indices were mixed on Tuesday.
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