Is there still a possibility of a "Santa Claus Rebound"? Historical data shows a success rate of 77%.

Source: BlockMedia Original Title: “It's still too early to give up” …the possibility of a year-end 'Santa Rally' remains - MarketWatch Original Link:

Optimistic Expectations in Market Mixed Performance

Since December, the stock market has seen some pullback, but the expectation of the year-end “Santa Claus Rally” remains valid. This phenomenon refers to the seasonal pattern of rising stock prices during the last five trading days of December and the first two trading days of January, starting this year from December 24.

According to the latest data, the major indices in the United States had a mixed performance last week. The Dow Jones Industrial Average fell 0.7% to 48,134.89 during the week, while the S&P 500 rose 0.1% to 6,834.50, and the Nasdaq Composite increased by 0.5% to 23,307.62. Some indices showed strong signs of adapting to the year-end sentiment.

Historical Data Supports Rebound Expectations

The S&P 500 Index reached a new all-time high for the 37th time this year on the 11th, further boosting market expectations for a rebound. Analysts pointed out that this year's Santa Claus rally is still valid and may set new highs before the end of the year.

Historical data confirms the reliability of this pattern. According to Dow Jones market data, since 1950, in years where the performance was weak at the beginning of December, the probability of the S&P 500 index rising during the Santa Rally reaches 77% (20 out of 26 times). The overall annual average return rate has maintained a consistent upward trend at 1.3%.

Macroeconomic factors provide support

Recent economic indicators also support a strong market at the end of the year. The slowdown in job growth in November and signs of easing inflation have raised expectations for interest rate cuts by the Federal Reserve, stimulating investment enthusiasm for risk assets.

From the perspective of the rising trends of traditional cyclical stocks and small-cap stocks, the possibility of a Santa Claus rally has further increased. This month, the Russell 2000 index has outperformed the S&P 500 index, and the equal-weighted S&P 500 index has also yielded higher returns than the market-cap weighted index.

The rebound led by bank stocks is seen as a positive signal for the market, while the adjustment of AI-related stocks provides space for the reorganization of investment sentiment and will not impact the overall market.

Risk factors should not be ignored

However, the high valuation risk of AI-related stocks remains a concern for the market. Although the scale of investment in AI infrastructure has boosted market valuations, if substantial investments fail to materialize, it could put pressure on the market.

The market will closely watch the success or failure of the year-end rebound, the sustainability of the AI theme, and the direction of interest rate policy, while preparing for strategies for the new year. The key question is whether the adjustments in mid-December are preparing for a Santa Claus rally or are a sign of rising fatigue—the market trends in the coming days will be a watershed.