Stocks are missing the widely anticipated year-end rally, a trend that doesn't bode well for the market's performance in 2025. Investors were hoping for a traditional 'Santa Claus' rally, covering the last five trading days of the year and the first two of January. Historically, the S&P 500 has averaged a 1.3% gain during this period, finishing higher nearly 80% of the time since 1950.
This year, however, the S&P 500 has declined over the past three trading days, putting the index in negative territory for the five-day stretch. Despite a 23% gain this year, marking the second consecutive year of exceeding a 20% annual increase driven by optimism surrounding interest rate cuts and artificial intelligence, doubts are emerging about the rally's sustainability. This recent weakness has raised concerns among investors, with some predicting a correction in 2025 given the market's strong performance. Jeffrey Hirsch, CEO of Hirsch Holdings and editor-in-chief of the Stock Trader's Almanac, notes that the failure of stocks to rally during this period has often preceded bear markets or opportunities to buy stocks at lower prices later in the New Year. The importance of January's performance is compounded if the Santa Claus rally fails this year. Hirsch points out that January has historically seen mixed results in post-presidential election years. While January is often viewed as an influx of cash from year-end bonuses and annual allocations, historically propelling stocks higher, the month has, on average, started positive but then experienced weakness
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