LIVE MARKETS-Santa didn't show but maybe January will bring the gifts

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SANTA DIDN'T SHOW BUT MAYBE JANUARY WILL BRING THE GIFTS

The so-called Santa Claus Rally indicator was a no-show this year for the third time in a row, so the folks at the Stock Trader's Almanac are now pinning their hopes on the January Indicator Trifecta.

Backing up a bit, the Santa Claus Rally (SCR), defined in the Stock Trader’s Almanac back in 1973, is the S&P 500's habit of advancing over the last five trading days of December and the first two of January. The average gain in that time frame has been 1.3% going back to 1950, according to the Almanac. The idea is that whether or not Santa comes to town, it can foretell the kind of year the market will have.

While it seemed for several hours on Monday that the S&P might manage a tiny Santa rally, the benchmark index ultimately closed the session 0.11% lower than its Dec. 23 close.

But what could this mean?

"The lack of a rally can be a preliminary indicator of tough times to come," wrote the folks at the Almanac. "This was certainly the case in 2008 and 2000. A 4.0% decline in 2000 foreshadowed the bursting of the tech bubble and a 2.5% loss in 2008 preceded the second-worst bear market in history."

When Santa didn't show, his absence was followed by flat years in 1994, 2005 and 2015, and a mild bear that ended in February 2016.

However, more recently, in 2024, "New Year's jitters were quickly shrugged off, and the S&P 500 logged its second straight yearly gain in excess of 20%," they noted.

Then last year, "the absence of Santa preceded the brisk tariff-induced selloff that knocked the S&P 500 down 18.9% from its February closing high to its April 8 closing low." Still the benchmark recovered to show a 16.4% gain in 2025.

In all, out of "17 down SCRs since 1950, 12 years have been up and 5 down, but the average gain is a tepid 6.7%."

Still, all may not be lost for 2026 as the Almanac publishers have two more indicators that they monitor for the so-called January Indicator Trifecta.

The next indicator is the First Five Days (FFD) and after that is the January Barometer (JB). In 2025, for example, the S&P 500 skipped the SCR and managed to advance only three of the first five trading days of the year, but it went on to show a monthly gain of 2.7% for January.

"With two more January indicators remaining, we will reserve final judgment until the end of January when the JB result is officially known. However, should the January Barometer be negative, it will weigh heavily on the outlook for full-year 2026," they wrote.

The second leg of this year's trifecta holds some promise with the S&P 500 eyeing three gains out of this year's first three trading days so far, but the third day and the month are both still young.

(Sinéad Carew)

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