S&P 500 Rises: Key Indicators to Watch

The Santa Claus Rally, known for the S&P 500 (SPX) tendency to rise during the final five trading days of a year and the first two of the new year, failed to materialize this time, with the index dropping 0.53%. In contrast, the first-five-days indicator offered a more positive outlook, as the S&P 500 posted a 0.62% gain in the first five trading days of 2025.

Stock Investors Stuck as Key Indicators Diverge—January Holds the Answer

Stock investors are caught in a bind after two widely followed market indicators delivered conflicting signals about the year ahead. With uncertainty growing, all eyes are on the next key marker to break the tie.

“Now that the S&P 500 has logged a decline during the Santa Claus rally while managing a slight gain in the first five trading days, investors are frozen by indecision,” said Sam Stovall, chief investment strategist at CFRA, in a post-market note.

What History Suggests

Historical trends hint at brighter prospects if the first-five-days indicator holds true. Data from Dow Jones Market Data shows that since 1950, the S&P 500 has achieved a median full-year gain of 16% when the first five trading days were positive, with gains in 81.3% of those years. A negative first-five-days performance, however, has led to a median annual gain of just 2.6%, with the index rising in only 55.6% of instances.

Still, the decisive signal may come from the January barometer, which tracks the S&P 500’s performance for the entire month. Jeff Hirsch, editor of the Stock Trader’s Almanac, emphasized its significance, noting that it has historically been a strong predictor of full-year trends.

Since 1950, in seven years where the Santa Claus rally failed but January ended on a positive note, the S&P 500 delivered full-year gains six times, with an average increase of 18.2%. The sole exception occurred in 1994, when the index posted a modest 1.5% decline.

The Next Big Test

With the first indicators of the year split, investors are left waiting for January’s performance to provide clarity. While past patterns offer guidance, the market’s final verdict for 2025 remains uncertain, leaving participants watching closely for the tiebreaker.