Santa Claus Rally
The Santa Claus Rally is a term used to describe the last five trading days of the year and the first two of the new year. And yes, Virginia, it is real. The period is defined by the Stock Trader's Almanac and Yale Hirsch, who created it in 1972.
The short period has been analyzed and historically shown to be a particularly bullish week in the trading year for the Dow Jones Industrial Average. Since 1896, when the Dow was created, the week has delivered an average gain of 1.06 percent annually, and has risen 78 percent of the time. That one-week average is higher than the average for all other weeks in the year, which post a gain rate of 54 percent, and represents an annualized rate of more than 80 percent.
The week is also considered a barometer for the following year with the saying “If Santa Claus should fail to call, the bear will come to Broad and Wall.” There is debate as to whether the historical evidence really ties a bearish Santa Claus Rally week with a poor performing year after.