Sorry investors, but there's no such thing as an early 'Santa Claus rally.' Here's when the real gains typically happen.

By Mark Hulbert

Analysts like to overhype stock-market rallies in the fall, but the numbers show Santa only arrives once a year

Be patient, Santa's on his way...

Wall Street is famous for taking Santa Claus's good name in vain.

If this year is like past ones, in fact, analysts soon will begin classifying every rally, no matter how small, as a "Santa Claus rally." Don't believe them. The only Santa Claus rally that has any statistical significance doesn't begin until Christmas.

Of course, analysts aren't focusing on statistics when classifying every rally as from Santa Claus, but instead are engaged in sales and marketing. They are just as shameless as the retailers who, earlier and earlier every year, start displaying their Christmas merchandise. Last year, for example, two analysts I follow pronounced in mid-October that a Santa Claus rally was imminent. Another analyst in late October 2025 advised clients to sell their underperforming stocks in order to increase their profit during the upcoming Santa Claus rally.

These analysts were not alone. As you can see from the above chart of last year's fourth quarter, Google searches of "Santa Claus rally" began to pick up in late October.

Needless to say, the stock market will inevitably rally at some point between now and the end of the year. But for such rallies to deserve Santa's good name, there must be a stronger likelihood of rallying in this two-month period than in other months of the year.

To test whether such a likelihood exists, I calculated each month's maximum possible rally potential. I measured the Dow Jones Industrial Average's DJIA gain from that month's lowest close to the subsequent month's highest close. Note that you'd have to be clairvoyant (or lucky) to realize that gain, since you would need to know in advance when the DJIA is about to hit its low and high. Still, this calculation should capture whether there is an unusually large rally potential in the last two months of the year.

There isn't. On average since the DJIA was created in the late 1890s, the November-December period's rally potential is indistinguishable from the all-month average. That doesn't mean the market won't rally between now and Christmas; it just means that, if it does, it has nothing to do with Santa Claus. With just as much statistical validity, you could claim that any rally in October is a "Great Pumpkin Rally."

The real Santa Claus rally

The Santa Claus rally that does enjoy statistical significance covers the period from Christmas through the second day of January. Since 1896, the DJIA over this period has risen 77% of the time, with an average gain over all years of 1.5%. In contrast, the DJIA has risen 56% of the time over all periods of similar length and produced an average gain during those periods of 0.2%. These differences are significant at the 95% confidence level that statisticians often use to determine if a pattern is genuine.

The bottom line: Be patient. The only Santa Claus rally that counts won't arrive until Christmas - just like the big man himself.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

-Mark Hulbert

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-26-26 1609ET