Seasonal Trading Trends Favor the Day After Christmas

Dec. 26 is historically the market’s strongest trading day, according to Bespoke Investment Group.

U.S. stocks rallied into the Christmas holiday on Wednesday, with the S&P 500 hitting a new intraday record during the shortened Christmas Eve session.

For investors, however, the real holiday gift from Wall Street often comes after Christmas.

Bespoke Investment Group data show that Dec. 26 has been the most reliably positive session of the year for the S&P 500. Since 1953, when markets were open the day after Christmas, the index has declined only six times over 39 years — and never by more than 0.5%.

When trading takes place on Dec. 26, the S&P 500 also records its strongest average gain of the year at 0.5%, along with the highest median gain at 0.4%.

“Seasonal trends should never be the sole basis for bullish or bearish positioning, but this is an unusually consistent pattern,” Bespoke said in commentary shared with MarketWatch.

Friday’s session marks the second day of the Santa Claus rally, the seven-day stretch covering the final five trading days of one year and the first two of the next. The rally carries extra importance this year after delivering negative returns in each of the past two years.

According to Dow Jones Market Data, Santa has never skipped three years in a row.

Stocks were broadly higher Wednesday, with the S&P 500 up 0.3%, the Nasdaq edging 0.2% higher, and the Dow Jones Industrial Average leading with a 0.6% gain.