Will 2022 See a Santa Rally or a Grinch Collapse?

12/13/2022 Marine Bank


Back in 1972, Yale Hirsch of the Stock Trader's Almanac proposed the existence of the Santa Rally – and it's been a constant source of eggnog-fueled debate for decades.

The Santa Rally refers to the general tendency of the U.S. equity markets to post gains in trading days between Christmas and the first two days after New Year’s, but has recently been extended to include the entire month of December.

The Stock Trader’s Almanac found that since 1950, the average movement in the S&P 500 Index during this period of seven trading days has been a gain of approximately 1.4%.

But is the Santa Rally really because it happens to fall in the month of December – which has historically been one of the best months for the equity markets? Let’s examine.

The December Effect

Since 1950, we have had a lot of Decembers. Did you know that 54 of those Decembers brought positive gains for investors while 18 produced negative returns?.

Further, the S&P 500 has gained an average of 1.6% during December, the highest average of any month and more than double the 0.7% gain of all months, according to data from Morningstar (September, is the worst month of average for stocks, with a 0.7% average decline).

Santa or the Grinch This Year?

As we start December 2022, we have plenty of reasons to remain hopeful and plenty of reasons to remain cautious:

  • Hopeful because the DJIA entered bull market territory on the 2nd day of December, as it has advanced 20% off of its low from September and is only 5% off of its all-time high.
  • Cautious because all the major U.S. equity indices are down YTD, with the S&P 500, NASDAQ and Russell 2000 down double-digits.

If you’re prone to feeling like Santa, remember that:

  • The last three Decembers ended well, with gains of 2.9%, 3.7% and 4.4%.

But if you’re prone to feeling like the Grinch, make sure you review poor-performance-Decembers through a historical lens:

  • For the month of December in 1931, stocks were hammered and the S&P 500 suffered losses of 14.5% (note that the S&P 500 first came to be in 1950, but it was back-tested through 1928)


The January Effect will Help, Right?

Oh, and in case you’re thinking that the January Effect is more important than the December Effect, did you know that:

  • Since 1950, we have seen 43 positive Januarys and 29 negative ones, with an average return of 0.80%?

In other words, December has historically been a better month when compared to January. Interesting.


The Monkey Effect

If you incorporate the Santa Rally, the December Effect, the January Effect or the made-up Grinch Collapse into your investment theory, then you may as well hire a monkey to pick your investments.

Because in 1973, Princeton University Professor Burton Malkiel claimed in his best-selling book, A Random Walk Down Wall Street, that “a blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

And according to a publication from Research Affiliates, with 100 monkeys throwing darts at the stock pages in a newspaper, the average monkey outperformed the index by an average of 1.7% per year since 1964.

Find a Santa Monkey?

Makes one wonder what would happen if you dressed up a fat monkey in a Santa suit and asked the Santa Monkey to pick your investments.

But if you can’t find a Santa Monkey, talk to your financial advisor.

With help from our financial advisor, Dallas Lee Whittaker, you can manage your finances and achieve your goals. 

Dallas Lee Whittaker


(217) 547-1371

I would like to learn more about Marine Bank's Financial Planning program. Please contact me

Dallas Lee Whittaker CFP®, CMFC®, CLU® 
Senior Vice President

Dallas has over 20 years of experience in all areas of wealth management and financial services. He is passionate about adding value to the lives of his clients through education and addressing their financial goals in a collaborative manner. With a deep knowledge of insurance which is an added benefit when doing financial planning, Dallas is an asset to our clients and the Marine Bank Wealth Management team.

Dallas is a Certified Financial Planner™ and currently holds a Chartered Mutual Fund Counselor (CMFC) designation awarded through the College for Financial Planning and a Chartered Life Underwriter (CLU) designation through the American College. As Senior Vice President of the Marine Bank Wealth Management Department, Dallas focuses on comprehensive financial planning to help individuals and businesses achieve peace of mind in their financial lives with an emphasis on retirement strategies, legacy planning, and generational wealth management.

Copyright © 2022 FMeX. All rights reserved. Distributed by Financial Media Exchange.