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The so-called Santa Claus Rally is the tendency for markets to rise in the final days of December and early January. It doesn’t happen every year — and it’s never guaranteed — but history shows that markets often finish the year on a stronger note than they start it.
For investors, the real takeaway isn’t about timing a festive bounce. It’s a reminder that staying invested and thinking long term matters far more than trying to pick the perfect moment. The best returns tend to come from consistency, not Christmas miracles.
When investing, your capital is at risk.
We’re half-way through December, which means strange Christmas sandwiches, embarrassing yourself at the office party, and the annual question investors love to ask: will we get a Santa Claus Rally?
If you’re new to it, it’s the tendency for markets to rise during the last week of December and the first couple of trading days in January1. It doesn’t happen every year, but historically it’s been surprisingly common. Just remember, as with everything in investing, nothing is guaranteed.
The term ‘Santa Claus Rally’ was made popular by Yale Hirsch, who coined it in the 1972 edition of the Stock Trader's Almanac and it’s stuck around ever since.
So why does it tend to happen?
There’s no single reason, more a mix of things: lighter trading volumes, end-of-year optimism, portfolio rebalancing, bonus season, and sometimes just… vibes. Markets can be funny like that.
Maybe a bit of Christmas cheer can be more powerful than hitting Q4 earnings reports? Just like Santa himself, not everything needs a logical explanation.
What’s happening this year?
So far, the mood music for the UK and US markets have been steadily optimistic (and Christmassy) as inflation cools and investors feel more confident heading into 2026.
The FTSE 100 continues to show resilience, and global equities are ending the year with momentum, so we may be set up nicely for a decent festive push.
But remember: seasonality isn’t a guarantee of anything. A Santa Rally isn’t set in stone, and short-term moves shouldn’t steer your long-term plan.
What it means for you
The Santa Rally should be seen as a bit of fun. If a rally comes, great. If it doesn’t, your long-term strategy is the thing that matters most.
That’s why investing over time, diversification and staying consistent usually beat trying to guess what happens in a particular week. A lesson that applies anytime of year.
All I want for Christmas is… a diversified portfolio
If you’re yet to give yourself the gift of investing this Christmas. Head to the ‘Invest’ tab in your Chip app and see how you could put your money to work today with a Stocks & Shares ISA.
That’s it for 2025, we’ll be back next year to keep you up to date with whatever the world of investing brings.
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment. Past performance is not a reliable guide to current or future performance, and should not be the only thing you consider when selecting a fund. The value of investments that are not in pound sterling may be affected by changes in exchange rates.
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Important to know: When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment.
1Tax treatment depends on individual circumstances and may be subject to change in the future.