Believe in the Santa Claus rally! Five reasons will support the U.S. stock market's year-end rebound.

The Chief Market Strategist of Carson Group stated that the trading window for the Santa Claus rally will officially open next week, which should bring an end-of-year rebound for U.S. stocks.

The Santa Claus rally refers to the last five trading days of the year and the first two trading days of the new year. Historically, the stock market has performed positively during these 7 days.

Historical data dating back to 1950 shows that the average gain for the S&P 500 is 1.3% and it has risen 79% of the time during the trading window of the Santa Claus rally.

According to Bank of America, when using stock market data dating back to 1928, the average gain during this trading window is even higher, at 1.6%. Such gains would set new historical highs for U.S. stocks.

Although the returns of U.S. stocks have been sluggish so far in December, with the S&P 500 (SPX) down 2.66% and the Dow (DJI) down 5.75%, Ryan Detrick of Carson Group expects a strong rebound in the market in the near future.

There are five reasons why he remains optimistic about U.S. stocks before the end of the year.

First, December is the month when the stock market is most likely to rise during the year, with a probability of 74.3% for U.S. stocks to increase.

Secondly, December is the month when the stock market is most likely to rise during an election year, with a probability of up to 83.3%.

Then, in election years when the S&P 500 recorded double-digit gains, the stock market has never declined in December.

Next, the Federal Reserve's December policy meeting is almost the last major event of 2024, opening the door for a two-week quiet period. “Remember, in the absence of news, stocks often perform well, which is why the stock market tends to strengthen around the holidays,” Detrick said.

There are signs that after a ten-day decline in the Dow, stocks are oversold, largely approaching the same oversold levels that marked the bottom of stock prices earlier this year.

“Don't stop believing in the Santa Claus rally,” Detrick said.

Article reposted from: Jinshi Data