MW Split indicators leave stock investors 'frozen by indecision.' A tiebreaker awaits.
By William Watts
S&P 500's first five days of January eke out gain after Santa rally proves a bust
A pair of closely watched but overlapping stock-market phenomena delivered a split decision for investors looking for clues to possible full-year performance. A tiebreaker awaits.
The so-called Santa Claus rally, which refers to the tendency of the S&P 500 SPX to rally over the last five trading days of a calendar year and the first two trading days of the next, proved a bust, with the index giving up 0.53% over that span. Wednesday marked the fifth trading day of 2025, with stocks posting a gain of 0.62% over that stretch, marking a positive reading for the intuitively named first-five-days indicator.
"Now that the S&P 500 has recorded a price decline during the Santa Claus rally period, while eking out a slight gain during the first five trading days of 2025, investors are once again frozen by indecision," said Sam Stovall, chief investment strategist at CFRA, in a note after the closing bell.
The tables below from Dow Jones Market Data show why a positive performance over the first five days might offer investors a bit of cheer after getting snubbed by Santa.
As it shows, the S&P 500 has posted a median full-year gain of 16% after a positive first five trading days of the year, rising in 81.3% of instances, based on data going back to 1950. In contrast, a fall over the first five days has seen a median gain for the year of just 2.6%, with the S&P 500 up just 55.6% of the time.
But as Jeff Hirsch, editor of the Stock Trader's Almanac, told MarketWatch last week, the most important early indicator is the so-called January barometer, which is simply how the market does over the full month.
In the seven years since 1950 that stocks dropped during the Santa rally period but the January barometer was up - regardless of what stocks did in the first five days - the S&P 500 has risen six times, with an average full-year gain of 18.2%, he said. The down year came in 1994, with a small decline of 1.5%.
-Ken Jimenez contributed.
-William Watts
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(END) Dow Jones Newswires
January 08, 2025 18:51 ET (23:51 GMT)
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