What is a year-end rally?

"Year-end rally" (also called Christmas rally; known in the US as Santa Claus rally or simply Santa rally) is a significant rise in stock prices in the final weeks of the year. The duration of this rally varies: sometimes it lasts a week, sometimes several months, and stock market analysts often start using the term as early as the beginning of November.

Historically, this phenomenon is quite frequent, with, for example, the S&P 500 showing a rise in 74% of cases in December between 1950 and 2019. Various theories explain the year-end rally, such as professional managers attempting to make their annual results look more prosperous, an upturn in the economy during the holidays due to increasing consumer spending, or investors anticipating the January effect by buying shares as early as the end of December.

The year-end rally is often viewed as a seasonal effect that gives a positive boost to the stock market towards the end of the year.