Tis’ the Season: December Historical Patterns
As we enter the final month of what has been a positive and eventful year of extremes, it’s worth stepping back to revisit December seasonality—an important piece of the framework guiding our tactical approach as we strive to finish 2025 with strength.
If you ask most investors what comes to mind when discussing the markets in December, you’ll undoubtedly hear about the “Santa Claus Rally”—a well-known stretch of seasonal strength often attributed to holiday spending and year-end optimism. First identified in 1972 by Yale Hirsch of the Stock Trader’s Almanac, this rally doesn’t span the full month, but specifically the last five trading days of December and the first two of January. Since 1950, this brief window has produced higher returns 77.3% of the time, making it a seasonally jolly period worth keeping tabs on.
December’s strength extends beyond the Santa Claus period. It has historically been the most likely month for gains in the S&P 500, with the index rising 73.3% of the time since 1950, and trailing only November and April in total average returns at 1.4%. But performance inside the month tends to be uneven: the first half of December is often choppy, while the back half delivers the bulk of the gains. As highlighted in research by Ryan Detrick of Carson Investment Research, daily returns frequently begin to ramp higher after mid-month, aligning with the same forces that drive the Santa Claus effect.
This year’s setup could rhyme with history. With a contentious FOMC rate decision on deck, along with pivotal inflation and employment data arriving next week, markets may experience a familiar early-December hesitation. Yet these catalysts also have the potential to clear the fog of uncertainty just as we enter the historically strong stretch that leads into year-end
Closing Thoughts
As investors, we know that seasonality is never a promise—much like forecasting the weather, it can offer a helpful guide but shouldn’t be relied on in isolation. Still, December has long been a month where optimism tends to find firmer footing. With the glow of the holidays approaching and confluence with historical trends setting up in our favor, this is a time to stay focused, stay nimble, and position thoughtfully for what could be a constructive finish. And, much like the season itself, markets have a way of saving a little magic for the final days. We’ll be watching closely to see whether this December delivers its traditional touch of year-end cheer.
The views stated in this letter are not necessarily the opinion of Cetera Wealth Services, LLC, and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.