Ryan Detrick, Chief Market Strategist at Carson Research, has a message for nervous investors as the holiday trading period approaches: Don't stop believing in Santa.
Sure, the historical data looks a bit grim when the Santa Claus Rally doesn't materialize. But with the S&P 500 hovering just 0.33% below all-time highs, Detrick thinks it's way too early to write off the year-end rally that traders have come to expect.
A Quick Recovery That Changed the Mood
The official Santa Claus Rally period kicks off Wednesday, covering the final five trading days of the year plus the first two of the new year. And while Detrick acknowledges that failed rallies can be problematic, he's more impressed by how quickly the market bounced back from recent turbulence.
In a post on X this Monday, Detrick pointed out the whiplash-inducing shift in market sentiment. Just three trading days earlier, the S&P 500 was down 2.6%, and doomsayers were declaring the end was near. Now? The index is flirting with record highs again.
It's a classic example of the psychological tug-of-war that defines investing—the battle between fear during temporary dips and the reality of continued recovery. Detrick's position remains unchanged through the noise: "Don't stop believing in Santa will always be my take."
When Santa Doesn't Show Up
That said, Detrick isn't ignoring the warning signs completely. The Santa Claus Rally, when defined strictly as that seven-day window, has historically been a reliable predictor of near-term market behavior.
According to Detrick's data, when this period delivers negative returns, the following first quarter tends to be rough. Case in point: last year. The S&P 500 posted a -0.5% return during the 2024 holiday window, which was followed by a painful 4.6% drop in the first quarter of 2025.
"It is when Santa doesn't show up that we should be worried," Detrick admitted, acknowledging the real correlation between a red December finish and a rocky January-March stretch.
But here's the thing: despite that brutal start to 2025, the market is currently up nearly 17% year-to-date. Seasonal indicators matter, Detrick suggests, but they shouldn't shake your long-term conviction.
The Year-to-Date Scorecard
After navigating federal policy shifts and economic uncertainty throughout 2025, the stock market has shown remarkable resilience. All three major U.S. benchmark indices are solidly in the green for the year.
The S&P 500 has climbed 17.21%, while the Nasdaq Composite surged 21.51% and the Dow Jones advanced 14.08% on a year-to-date basis.
On Monday, both the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust ETF (QQQ), which track the S&P 500 and Nasdaq 100 indices respectively, closed higher. SPY gained 0.62% to $684.83, while QQQ advanced 0.47% to $619.16.
As of Tuesday, futures for the Dow Jones, S&P 500, and Nasdaq 100 indices were showing mixed signals ahead of the holiday trading period.